RBI stumps real estate sectors expectations by maintaining status quo

Reserve Bank of India (RBI) has stumped real estate sector’s expectations by maintaining status quo. Contrary to overall expectations, the RBI kept the repo rates unchanged to 5.15 per cent while maintaining an accommodative stance.

“From a real estate point of view, a rate cuts are obviously always welcome as they help improve overall sentiment. Also, lag-less transmission of rate cuts to retail borrowers as RBI has mandated banks to directly link interest rates with repo rates. The expected rate cut of 25 bps would have caused home loan values to fall below 8 per cent for first time ever,” said Anuj Puri, Chairman – Anarock Property Consultants.

“However, it is also true that another rate cut alone would have been insufficient to stir housing sales significantly across budget categories. The previous rate cuts throughout 2019 had almost no perceptible impact on residential sales. In fact, back in 2014, even when the home loan rates were high in two digits at 10.3 per cent, housing sales remained at peak levels. In the present scenario, only the combined effect of lower interest rates coupled with other measures such as a cut in personal taxes – reportedly being considered by the FM – can actually stimulate residential sales out of their current lethargy,” he added.

After five consecutive rate cuts in 2019, the Central Bank takes a pause, said Ramesh Nair, CEO & Country Head – India, JLL. He further said, “The central bank by keeping the rates unchanged has recognised that the need of the hour is to infuse confidence about the economic growth through a holistic approach. This will come by combining fiscal and monetary measures.”

Sankey Prasad, Managing Director & Chairman, Colliers International India said, “The Government along with industry experts should identify and resolve other sensitive issues effecting the sector. To ensure the real estate sector is investment conducive, we should look at how we can streamline the approval process, improve transparency and manage projects more effectively.”

Shishir Baijal, Chairman & Managing Director, Knight Frank India in his reaction said, “The industry expectation was that slowing economic growth would take precedence in RBI’s policy decision. Hence, RBI’s decision to not lower interest rate has come as a surprise and a bit of a disappointment to the industry. Lower interest rate would have helped push up credit demand and investment in the economy, aiding overall economic growth. It would have provided much required reprieve to some ailing sectors like real estate and auto.”

Surendra Hiranandani, Chairman and Managing Director, House of Hiranandani said, “A repo rate cut would have been welcome as it would have lifted industry sentiments. The growth trajectory of the real estate sector will depend on the successive transmission of rate cuts to the end consumers and translate into lower EMIs. Lower interest rates will also bring back fence-sitters who were waiting for the perfect opportunity to invest in their dream home.”

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