Money & Banking

RBI’s rate cut, extension of loan moratorium are positive steps, say developers

Anil Urs Bengaluru | Updated on May 22, 2020

The rate cut will not only send out positive signals but will enable banks to lend even more, said Anuj Puri, Chairman, Anarock Property Consultants

Real estate players also seek a one-time restructuring of loans

Reserve Bank of India’s repo rate cut of 40 basis points (bps) — from 4.40 per cent to 4 per cent — is seen as another big step that will ease the liquidity problems facing real estate developers.

The rate cut will not only send out positive signals but will enable banks to lend even more, said Anuj Puri, Chairman, Anarock Property Consultants. “Like all sectors, real estate too has been severely impacted. To this gloomy backdrop, the rate cut combined with the further extension of loan moratoriums by three months up to August 31, 2020, augurs well for the sector,” he added.

The move is a major booster shot aiming to cushion the impact of Covid-19 on the Indian economy. “Beyond doubt, repo rate cuts do uplift the sentiments of home buyers even further. Home loan interest rates have already gone down substantially over the last year, and are presently at an all-time low averaging between 7.15 per cent to 7.8 per cent,” explained Puri.

This RBI’s move today is expected to further help banks to lower home loan interest rates, which may get several more fence-sitters onto the market. “Moreover, the repo rate cut may compel banks to reduce the interest rates for FDs even further — this could result in even more people leaning towards housing as a better investment option,” said Puri.

Niranjan Hiranandani, President, Assocham and NAREDCO, said: “There has been a total collapse in demand in both urban and rural India since March 2020. The continued proactive measures taken by the RBI will help address these issues and revive the economy in the second-half of the year.”

“Industry though awaits one-time debt restructuring as a holistic measure to give a breather to industries across the board and help in their quick revival,” he added.

Shishir Baijal, Chairman and Managing Director, Knight Frank India, said: “The extension on the moratorium and improved terms will provide a breather to industry and household borrowers alike.”

He further said “It would have been a big respite if the long-standing real estate industry demand for a one-time restructuring of loans was allowed along with the measures announced today. The expected contraction of the GDP is worrisome emanating from a significant drop in private consumption. While the RBI has taken steps to boost liquidity, one of the real challenges of boosting demand remains, which we hope that subsequent announcements will address.”

Published on May 22, 2020

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