RBI maintains status quo: Home loan rates to remain unchanged


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RBI repo rate cut

The RBI kept Repo Rate unchanged at six percent in its fifth monetary policy review in this FY 2017-18. While developers expected the cautious stance owing to growing inflation, its minimal impact on home loan interest rates concerns them of slowed sales.

The Reserve Bank of India (RBI) has decided to keep the interest rates, Statuary liquidity ratio (SLR) and Cash reserve ratio (CRR) unchanged in its bi-monthly policy review. This effectively means a status quo on Repo Rates which stands at six percent after the fifth monetary policy review in this financial year. For the real estate sector, this would essentially mean no reduction in home loan interest rates, a change that all stakeholders, including buyers and sellers were desperately waiting for. However, looking at the economic scenario, industry experts anticipated the cautious stance by the RBI and thus, they ask buyers to remain calm and wait for lenders to bring down rates owing to immense competition in the market.

Addressing homebuyers, Gaurav Gupta, General Secretary, CREDAI-Ghaziabad and Director, SG Estates, says, “The market has been gaining stability post RERA and GST, with further cushion expected in the form of lending rates. Even though the RBI has not provided any rate cut this time, fresh home loan borrowers should not worry much as they may still witness lowered EMIs because amidst intensifying competition among the lenders, the banks might be forced to start cutting down the interest rates themselves.”

Despite not being in the favour of the realty market, the RBI has found support from industry stalwarts who trust to government’s intent towards controlling inflation. Standing with the government’s decision, Deepak Kapoor, President CREDAI-Western UP and Director, Gulshan Homz, opines, “This decision of the RBI to keep the rates unchanged has proved very substantial in the first quarter, post GST was implemented. The apex bank wants to maintain its vigilant approach in the upcoming two months as well. Before questioning the judgement of the apex bank on holding the rates, one must not forget that it has to keep sufficient cushion for the economy with the massive changes that will come about in the next few months in form of REITs, InvITs, and SPVs.”

While several experts point out that a rate cut at this time could prove healthy for the home loan market, they seem prepared to wait for the next cycle in February 2018. Penning his expectations from the forthcoming policy review, Niranjan Hiranandani, President NAREDCO says, “We hope that by February, the economic conditions will have evolved to a situation where RBI reduces the repo rates.” After today’s review, the Reverse RePo stands at 5.75 percent, Marginal Standing Facility (MSF) at 6.25 percent, CRR at 4 percent and SLR at 20 percent.


Here’s what other industry stalwarts have to say regarding the move –

Manoj Gaur, Vice President CREDAI-National & MD, Gaurs Group

In case of a low interest rate environment surrounding the economy and cash available in abundance, there is a high risk of inflation moving up. Hence, the RBI is not expected to reduce the rates until it is fully convinced about the inflation control. A rate cut today could have allowed the potential buyers to invest in property as the EMIs would have reduced further in coming months. We hope that the next bi-monthly policy review observes a rate cut as it has been a neutral review for the second straight time.

Sachin Sandhir, Global Managing Director, Emerging Business – RICS 

We are not surprised at the position adopted by the RBI. Keeping in mind the rising rate of inflation and global head winds, RBI has decided to adopt a cautious stand. Repo rate, has been kept unchanged at 6 percent. This means home loans will not reduce further, which does not do much for the real estate sector. A rate cut would have helped the economy but inflation also has to be taken into account. RBI has estimated inflation to be in the range of 4.3-4.7 percent for Q3 and Q4, respectively. Considering these factors, we believe the RBI has taken the right step.

Vikas Bhasin, MD, Saya Group

Even though the RBI has not cut the repo rate today, still there is a lot of room for the banks to further reduce the lending rates. The previous repo rate reductions in August by the apex bank are yet to offer the complete results; that is held by the banks. A lending rate of 6-7 percent is ideal for our realty sector as we are moving towards strong policy changes at the national level which will leave long term effects. on the realty sector and its allied industries. 

Avneesh Sood, Director, Eros Group

Looking at the market dynamics, we were projecting the RBI to maintain status quo. Any reduction in lending rate allows the sentiments in real estate to improve as the net cost on the buyer for the housing unit gets decreased. But with the market inflation already touching its projected limit for the financial year, it is appreciative on the part of the apex bank to keep the rates on hold as it will give the market more time to stabilise and allow inflation rates to come down in eventually.

Pradeep Aggarwal, Co-Founder & Chairman, Signature Global

A parallel cut in repo rate and CRR would have brought a win-win situation for the banks. They would have the interest rates reduced and could keep back additional funds. This would have increased their borrowing and lending capacity as well, thereby creating a wave of positive sentiments in the market. The reduction in rates would ultimately be advantageous to the customers for the reason that if banks had reduced rates, the same would apply to the end-borrowers too, and real estate market would have a pool of demand to deal with.

Abhishek Bansal, Executive Director, Pacific Group

A rate cut of 25 bps could have helped ease the pressure off the market which has been balancing itself through the confusions still pertaining with RERA and GST. During such scenarios, a slash in repo rate would have meant drop in home loan rates by banks, which ultimately reduces the burden off the buyers. With no change today, we expect the market to run uniformly with a static demand in the short run. 

Shishir Baijal, Chairman & Managing Director, Knight Frank India

The move to keep the repo rate unchanged by the Reserve Bank of India’s monetary policy committee comes as no surprise. The industry was not expecting a rate cut amid the current macro-economic scenario with inflation touching a 6-month high in October and more importantly the uncertainty staring the economy in the near future. However, the want of a growth-inducing monetary policy would continue to have its imprints on the slowdown-hit real estate sector. A cut in the policy rate could have helped stimulate growth and demand particularly in the wake of the recent Moody’s India upgrade.

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