The six-member Monetary policy Committee, headed by the RBI Governor Shaktikanta Das (MPC), has recently slashed the repo rate by 25 basis points, bringing it down to effective 6.25 percent. The said decision of the committee is in consonance with the objective of achieving the medium-term goal for consumer price index (CPI) inflation of four percent, while still supporting growth.
Being an important variable in the economy, interest rates impact financial investments and retail borrowings. Therefore, an increase or decrease in the repo rate significantly affects the borrowing and repaying capacity of the customers. The latest slash in the repo rate by 25 bps has brought down the reverse repo rate to six percent. Along with this, the Marginal Standing Facility (MSF) rate and the Bank rate has effectively come down to 6.5 percent, changing the policy stance from calibrated tightening to neutral.
Here is what some of our industry experts opine:
Amit Modi, Director ABA Corp and VP CREDAI, Western UP
This is the first time in the Financial Year 2018-19 that RBI has slashed key policy rates. Since in both the earlier instances the Apex bank had hiked the rates by 25 bps, the expectations were that the rate cut will now match the hikes. Subsequently, at least 50 bps concession was expected. Nevertheless, this is still a welcoming step and we look forward to another follow up on this in the next monetary policy announcement.
Shishir Baijal, Chairman and Managing Director, Knight Frank
The reduction in REPO and Reverse REPO rates by the RBI by 25 BPS is a welcoming move, which we hope will provide a further fillip to the demand side of the real estate sector. We hope that the banks will further pass on the benefits of the revised rates to the end-customers of loans, thereby making it easier for them to make their purchase decision. For a sector which has been suffering from poor end-user demand from quite some time now, this is indeed a step in the right direction.
Niranjan Hiranandani, National President, NAREDCO
The repo rate now will be 6.25 percent, while the reverse repo rate stands reduced to 6 percent. This is the perfect follow-up to the Budget speech by the Finance Minister Piyush Goyal. This will not just enhance liquidity in the economy but also boost the investments and give the economy a positive growth phase. However, further rate cuts in forthcoming reviews still remains an option. We hope that we will see more such positive moves from the RBI. From the perspective of real estate, this will significantly impact the home loan interest rates.
Rajan Bandelkar, President, NAREDCO West
The 0.25 basis points rate cut is a welcoming stance which will help to increase the sales in the real estate sector. There will be a dip in the interest rates on home loans, which will enable the buyers to make realty purchases, in both residential and commercial spaces. The Government is taking effective moves to stabilise and further enhance the real estate sector. This rate cut is a boost towards reinvigoration of the industry.
Ashok Mohanani, Chairman, Ekta World and Vice President, NAREDCO West
The rate cut and monetary announcement by RBI is certainly a welcoming move as it will lead to higher availability of funds and aid the sector with increased liquidity. The sentiment which was boosted by the recently proposed budgetary reforms, will see further improvement and convert the fence-sitters into purchasers. The demand for investments will also witness an impetus. A Reduction in the home loan interest rate will definitely increase the sales. This is another step towards making ‘Housing for All’ a success. We look forward to seeing a sharp rise in the sales and a significant drop in the unsold inventories by the end of 2019.
Manju Yagnik, Vice Chairperson Nahar Group and Vice President NAREDCO Maharashtra
Considering the overall evaluation of the current and evolving macroeconomic situation, it is indeed a practical decision by the Monetary Policy Committee (MPC) to reduce the policy repo rate under the liquidity adjustment facility by 25 basis points from 6.50 percent to 6.25 percent. This move coming just a few days after the Interim budget has surely brought joy to the sector. It will help in ensuring that the monetary policy is aligned with fiscal policy, keeping in mind the balance between supply and consumption. As for the real estate sector, reduction in home loan rates will definitely boost sales and ensure regular cash flow. The decision of changing the MPC’s stance from calibrated tightening to neutral may attract more positive changes in the forthcoming policies.
Ravindra Sudhalkar, ED & CEO of Reliance Home Finance
The decision of rate cut by RBI is a welcoming move. The market has been in search of liquidity from quite some time and a rate cut may ease the liquidity situation. We are hopeful that the banks will pass on the cuts, which will help to bring down the cost of funds for NBFCs. Most importantly, the exposure of banks to all NBFCs will be risk-weighted as per the credit ratings assigned to the respective NBFCs. This will allow the banks to lend more to well-rated NBFCs, thereby easing the liquidity scenario.
Parth Mehta, Managing Director, Paradigm Realty
The cut of 25 bps in the repo rate is in line with our expectations. There is a serious liquidity crunch faced by the banks and NBFC’s which has further led to dampening of the overall business environment. In view of the benign inflation, the cut is a logical move by RBI to induce the required liquidity.
Ashish Mahajan, Co-Founder, PropStory
The cut in the repo rate is a welcome move and signals a dovish outlook of the RBI. This can have a very positive impact on the real estate sector as mortgages to customers and working capital of the developer will get cheaper. Further, it will boost the rest of the economy which can augment the housing demand as well.
Puneet Chandra, Founder and Joint MD, Skootr
The rate cut will not only facilitate economic growth but also kick start the stagnant real estate sector, which has already been given a host of benefits in the present budget. It will bring a positive outcome in the industry and relaxation for the end-users. By bringing in more liquidity in the system, the said move will ease the inflation as well.
T Chitty Babu, Chairman and CEO, Akshaya Pvt Ltd
We welcome the RBI’s decision to cut repo rate by 25 basis points to 6.25 percent. It is indeed a positive step to revive the demand in the real estate sector. It will allow the banks to pass the rate cut benefits on home and other loans to the customers. Coupled with the announcements made in the recent Interim Budget, this will help to boost the real estate sector across the country and improve the homebuyer sentiments. The step will further augment lending as the EMIs will become cheaper. It can be expected that the real estate developers will witness a steady growth in the sales of inventory, across different segments in the coming quarters.
Rohit Poddar, Managing Director, Poddar Housing and Development Ltd
Given the benign inflation, a reduction in the repo rate was expected. The rate cut has changed the current calibrated tightening to a neutral stance which is required to stimulate growth in the industry.
Amit B Wadhwani, Co-founder, Sai Estate Consultants
The sentiment for the real estate industry has seen an upward ‘interest’ surge post the Interim budget proposals, favouring the homebuyers as well as the developers. The cut in repo rate in today’s policy announcement will act as a catalyst in reviving the real estate sector which was crippled with the financial crunch in the system. The banking regulator’s plan of injecting durable liquidity will push money into the banking system and ensure an increase in loans at better rates for the homebuyers as well as the developers. This will play a large role in bringing equilibrium in the demand and supply economics of the Indian real estate industry. The recently proposed income tax structure and rebate schemes will further increase the disposable incomes and hence, the incremental savings of the middle-income group.
Hiral Sheth, HOD Marketing, Sheth Creators.
Interest rate is one of the important factors to consider while buying a home. The rate cut will definitely help in bringing down the home loan interest rates and will give some amount of relief to the homebuyers. Also, it is expected that the banks will further pass down the benefit to the homebuyers, thereby encouraging them to buy their dream homes.
Dinesh Jain, Managing Director, Exotica Housing
Repo rate cut by MPC (Monetary Policy Committee) from the erstwhile 6.50 percent to 6.25 percent seems to be a very good decision for the loan borrowers. Now, banks can avail funds from RBI at lower rates and we expect that they will extend this benefit to the ultimate end-users as well. In this case, either the number of monthly EMI’s will come down or the duration of the loan term will be reduced.
After big sops of budget 2019 such as extended tax limit for individuals, no notional rent on second home and hike in TDS limit of rental income, the repo rate cut will further attract people to invest in the property market and avail home loan at a lower interest rate. Overall, the move will boost the demand for housing units.
Rohit Gera, Managing Director, GERA Developments
A reduction in the repo rate after two consecutive hikes earlier is definitely a positive move for the homebuyers. The sector which is currently reeling under the impact of financial throttling is in need of respite in the form of positive policy changes. This reduction will boost additional liquidity in the market which is the need of the hour. Repo rate cut along with all the other benefits announced in the budget will also encourage the fence-sitters to make the purchase decision.
Hari Prakash Pandey, Executive Director, Finance and Corporate Strategy, Runwal Group
The RBI's move on slashing the repo rate by 25 basis points focuses on driving growth and is expected to infuse liquidity in the system. This will be a much-needed relief for the real estate sector as it will lead to lower interest rates for the homebuyers. The decision will not only augment positive sentiments in the real estate sector but will also boost the residential demand in the times to come.
Sarojini Ahuja, Vice President Sales and Marketing, Transcon Triumph
The RBI's decision on reducing the repo rate by 25 basis points will make home loans cheaper and will also increase liquidity in the banking system. RBI has given positive signs showing that the market is improving and finally the financial institutions can now start on to pass the benefits to the end-users. Cheaper loans for homebuyers and escalating demand will further renew the interest in residential property purchases.
Manoj Paliwal, Chief Financial Officer, Omkar Realtors
The RBI’s decision to soften the interest rates by 25 basis points is a good move and a much-needed impetus for the real estate sector. The move will ensure softening of lending rates, thereby attracting more buyers to the realty market. Reduction in the rates at regular intervals will also improve the affordability quotient of the Indian homebuyers.