RBI’s rates unchanged a big relief for real estate sector, said Shishir Baijal, Chairman & Managing Director, Knight Frank. The decision on keeping key policy rates unchanged is on expected lines and will be a relief for the real estate industry that has been worried over a possible rate hike adversely impacting the market, he said.

“Since the last Monetary Policy Committee Meeting, there has been a big relief with the fall in crude prices and strengthening of the Rupee, thus, reducing inflationary risk. We believe easing inflation situation and the need to actively support growth are the primary consideration for the MPC to maintain a status quo on rates,” said Baijal.

Inflation target

Anuj Puri, Chairman – ANAROCK Property Consultants, said “The recent stand-off between the Government and the RBI owing to NBFC crisis and the apex bank’s endeavour to maintain its autonomy and reserves had caused the industry to watch closely whether the repo rate will increase or remain unchanged. That said, today’s move by the RBI to keep the repo rate unchanged at 6.5 per cent was more or less expected. This was not solely because inflation targets are still under control.”

Politically, an upward revision would not have served the current Government well as the 2019 elections are around the corner. “From the economic standpoint, a hike in repo rates would have had a direct impact on home loan rates. High housing loan interest rates are known deterrents to many buyers, especially in the affordable segment where higher interest rates can and do weaken sentiment,” explained Puri.

NBFC crisis

Any move to further discourage customers from availing of bank credit would ultimate exacerbate the liquidity crunch and adversely impact the economy. From that perspective, the unchanged repo rate will at least keep the demand for housing loans at status quo.

Puri said “The RBI obviously needs to maintain an adequate buffer for the economy – especially in light of the massive changes that are likely to come about in the next few months in form of REITs and SPVs. Also, the NBFC crisis currently shows no signs of relenting, and keeping the repo rates unchanged is definitely in tune with the current market signals.”

Ankur Dhawan- Chief Investment Officer- PropTiger.com, said “Increase in repo rate at this point of time would have been a very bad news for real estate industry which is already going through fund constraints due to NBFC liquidity issue. In fact industry was hoping if rates could have been reduced in this MPC meeting to revive industry. No change in repo rate is a slightly negative news for the industry.”

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