Repo rate cut: A growth inducing step in RERA and GST era


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RBI repo rate cut

The latest 25 bps repo rate cut is being hailed by real estate stakeholders. The move augers well for the home loan market and is holds the potential to boost housing sales in the upcoming festive season.

Yet again, the Reserve Bank of India (RBI) has slashed repo rate by 25 basis points, bringing the current rate to six percent from 6.25 percent. The move is instrumental for inducing growth in the Indian economy and the real estate sector, especially after the two biggest reforms of all times – Real Estate (Regulation and Development) Act (RERA) and Goods and Services Tax (GST). The rate cut has been hailed by realty stakeholders for it will be a boon for the home loan market. The resultant reduction in the interest rates for housing finance is the need of the hour.

Expressing delight, Brotin Banerjee, Managing Director and Chief Executive Officer, Tata Housing Development Company Limited says, “The move will impact home loan rates positively and enhance the consumer sentiment. With the market view calling for measures that encourage investments to boost growth, and with the installation of a regulatory regime for the property sector, we expect this move to keep the stimulus on for potential homebuyers to invest, and to benefit current borrowers.”

Despite this being the third review of the monetary policy in the Financial Year 2017-18, real estate stakeholders are wary of the actual benefit being passed to the consumers. Amit Modi, Director, ABA Corp and Vice President CREDAI Western UP avers, “The current reduction has brought the repo rate to its lowest in six and a half years. Easing interest rate will help revive health of businesses like real estate which are highly sensitive to interest rate movements. After demonetization, banks are flushed with cash and do not have to worry about reviving their bottom lines. They should be passing the benefits of the rate cuts to the end consumers now.”

In the current policy review, the reverse repo rate has been reduced to 5.75 percent from 6 percent, Marginal Standing Facility (MSF) adjusted at 6.25 percent, Cash Reserve Ratio (CRR) remains unchanged at 4 percent and Statutory Liquidity Ratio at 20 percent.

Here’s how a few other industry experts are reacting to the rate cut:

Deepak Kapoor, President CREDAI-Western UP and Director, Gulshan Homz

The realty sector welcomes the repo rate cut by RBI today which is expected to fuel housing demand as the EMIs are expected to fall even more. This rate cut has come at a time when GST and RERA have entered in to a settled phase and the sector is observing a transition where the buyers are increasing their activity and developers eagerly waiting to satisfy the demand. GST’s input tax credit feature coupled with lowered EMIs will further reduce the burden off the buyers and pave way for strong demand-supply matrix in the sector.

Gaurav Gupta, General Secretary CREDAI-RNE and Director, SG Estates

Indian real estate market is moving strong towards a new era where GST and RERA are leading the way from the reforms’ front. Pricing, on the other hand, remains a vital player for Indian consumers and any dip there is inversely proportional to the demand for property. A reduction in Repo rate today, happening after October 2016, will push the banks to further reduce the lending rates. With transparency increasing in the sector, the low pricing factor will help boost the property demand and further clear the inventory in macro real estate regions.

Surendra Hiranandani, Chairman and MD, House of Hiranandani

One of the key points highlighted by the RBI included speedier clearance for projects which has been a long standing demand of the industry. We need to remember that deregulation will be the key to the success of various government initiatives in the future. A major impediment to real estate development in India remains the approval process. We are ranked at 185 out of 187 countries by the World Band for Ease of obtaining Construction Permits. It effectively means that we are in the same club as war torn countries where institutions have collapsed and offices which accord approval have been bombed to rubble. The government must look at addressing the shortcomings plaguing the real estate sector at the earliest if it wants to realise the dream of our Prime Minister of “Housing for All by 2022”.

Sanjay Shenoy, Joint Managing Director, Legacy Global Projects

Reduced cost of credit is excellent news for the real estate industry. Eased inflation and GST have brought about the very impact we were looking forward to. The real estate sector has been working hard to increase transparency and ease of doing business with months of toil to implement RERA. The announcement is the very catalyst required to attract investors and spark about a surge in demand, ahead of the auspicious season of festivities to start post August.

Shishir Baijal, Chairman & Managing Director, Knight Frank India

The policy rate cut of 25 bps is a welcome move. Considering the battery of new reforms in force, a good monsoon in progress, benign inflation numbers, favourable global environment and the overall uptick in industry sentiments, a healthier lending rate could have provided the much needed thrust to fuel India’s growth story. But we are happy to see that the central bank has adopted a monetary policy that propels growth. A growing economy would signal healthy consumption across all genres of the Indian real estate.

Abhishek Bansal, Executive Director, Pacific Group

Inflation is recording new lows since the last two quarters, observing a great feat. The stock market, on the other hand, is achieving greater heights, thus, signaling a strong market response and getting ready for the long run. Today’s rate cut will only add more weight to the sentiments and push the customers to move towards investments where real estate sector will greatly benefit. As GST is settling down and RERA is gaining momentum, real estate sector is projected to become the investment hub very soon.

Avneesh Sood, Director, Eros Group

Implementation of GST has completed its very first month and a great response can be already observed as the buyers’ queries are increasing day by day. A rate cut at this moment will boost these sentiments further where footfalls and conversions are bound to increase. Final festive season of this calendar year is nearing and this rate cut can allow the banks to cut down on their lending rates further. Economy is shaping up well with a growth trajectory becoming visible for the real estate sector as well.

Rakesh Yadav, Chairman, Antriksh India Group

The sector was hopeful for a rate cut today and after almost nine months, RBI has decreased the key rate by 25 basis points. Banks must follow suit in order to pass on the benefit to this sector’s customers. This rate cut has happened in the post GST and RERA era, where customers are looking towards a much transparent and simplified sector where any fall in the cost to the buyers will further enhance the demand for property.

Sachin Sandhir, Global Managing Director - Emerging Business, RICS South Asia 

The slash in repo rate is on expected lines considering that inflation is under control. The cut will lower interest rates and make home loans and auto loans, among others, cheaper. Reforms in the real estate sector (RERA/GST) coupled with the rate cut will encourage home sales and we are glad that this cut has come just ahead of the festival season, which usually sees brisk home sales. It will help break the lull in the sector. We are also glad that the RBI governor has taken note of the need for a time-bound single window clearance at the state government level for faster approvals for affordable housing projects. This has been a demand of the industry and RICS for a long time. A delay in securing approvals adds to the cost of a project, so any move towards faster approvals will benefit the affordable housing sector. 

Rohit Gera, Managing Director, Gera Developments and VP Credai Pune Metro

The reduction of the repo rate by 25 bps is a welcome step. We look forward to the banks and financial institutions transmitting this to homebuyers at the earliest. This reduction when passed on will improve the affordability for all segments. The overall affordability for homes over the last three years has increased substantially on account of even moderate salary increases, a reduction in the real rates of homes as well as a reduction in the interest rates. This increased affordability is sure to have a positive impact on home buying sentiment in the near future and help convert the need for housing into demand.

Rattan Hawelia, Founder and Chairman, Hawelia Group

GST has caused a sudden dip in real estate sales, especially in the affordable category, hitting the home loan business badly. For long, real estate market was looking for measures that encourage investment to boost growth numbers, and with the onset of a regulatory regime for the sector, we expect this move to keep the stimulus on for genuine end user homebuyers, and also to benefit current borrowers. At this juncture of struggling real estate sector reduction in repo rate can surely have a revival impact and such move will help to drive the sales if the banks pass on the benefit to home loan seekers.

Sanjay Jain, Group Managing Director, Siddha Group

The 25 basis point slash in the repo rate and the reverse repo rate in the third bi-monthly policy 2017-18 will have a positive impact on the real estate market. This move is expected to make home loans cheaper if the banks pass on the benefits to the consumer, improving the buyer sentiment to invest in the market. The Government and RBI are working closely to provide a major thrust to housing for all. Faster GDP growth and declining interest rates will collectively help boost the growth of the real estate industry. 

Tushad Dubash, Director, Duville Estates

The RBI governor cutting the repo rate by 25bps to 6 percent is a welcome step for the real estate sector. Lower interest rates coupled with progressive measures like GST and RERA will improve and bring in positive sentiments and spearhead growth for the realty sector. It is now important that banks now offer home loans at more attractive rates which will incentivise customers to buy their dream home.

Arjunpreet Singh Sahni, Executive Director, Solitairian Group

With inflation at a five year low, it is along the expected lines that RBI has announced 25 bps rate cut in its third monetary policy review for the current fiscal year, however, it will hardly have any positive impact on the current lukewarm consumer demand scenario in real estate sector. Undoubtedly, it will spread some positivity in the market, but to actually boost the consumer sentiments at this juncture, an aggressive cut in repo rate was the need of the hour.

Pankaj Kumar Jain, Director, KW Group

We expect the announcement of 25 bps repo rate cut by RBI will translate into reduction in home loan rates immediately. In fact, it is a much-awaited move which may revive the demand in the market, however, it largely depends on the banks to generously pass on its benefits to the consumers in the form of reduced home loan rates. If the home loan rates may witness a considerable reduction at this point of time, it will definitely throw open the window of opportunities for the homebuyers as currently, the real estate prices have almost bottomed out.

Ravindra Pai, MD, Century Real Estate Holdings Pvt Ltd

It is a welcome move, especially to combat the odds industry was seeing in recent times. Cheaper home loan definitely will boost positive sentiments amongst the homebuyers and in turn will help the developers to gain the momentum. With RERA ushering in, budget housing getting infrastructure status and RBI rate cuts, we certainly feel good times for the industry are just a stretch away and a matter of a very short time.

Vinod Rohira, MD and CEO, Commercial Real Estate & REIT, K Raheja Corp

The change in the repo and the reverse repo rate will give a much-needed impetus to the realty sector.  With the recent change in reforms and policies, this rate cut comes as a blessing for improving buyer sentiments. The steps taken are on the right path to address the economy, and we are optimistic that the banks will also pass on the benefit to the consumers, which in turn will help propel the growth of the industry.

Ashwin Sheth, CMD, Sheth Corp Ltd

Although the RBI has maintained its neutral stance, the indication towards easing of policy rates and the upcoming festive season will renew further interest in the real estate sector. The reduction in the repo rates will help in bringing down the home loan interest rates which in turn is likely to bring in some amount of relief to the homebuyers. But, the banks will also have to pass down the benefit to the homebuyers to encourage the prospective buyers to move a step closer to purchase their dream home. 

Ashish Sarin, CEO, Alpha Corp  

The lowering of the benchmark repo rate by 25 basis points to a seven year low from 6.25 percent to 6 percent will be instrumental in stimulating domestic economic recovery process. The banks should now pass on the benefits of this rate cut by lowering the mortgage rates, thereby making home loans more affordable for the buyers. Slew of policy reforms undertaken by the government in the recent past have been instrumental in reviving the sentiments of customers in the sector and further reduction in the interest rates would be influential in propelling demand for real estate products.

Suresh Garg, CMD, Nirala World

For homebuyers, repo rate cut is always a boon as it leads to lower EMIs. At this time when developers are rushing towards possession and offering ready-to-move-in options, low interest rates can do wonders. Benefits under PMAY for first homebuyers and GST has already brought them back in the market. This is the most significant repo rate cut of RBI after demonetisation.

Ashudeep Batra, ED, Exotica Housing

Repo rate cut was the most awaited step from the government and after benefits of PMAY, GST, 7th pay commission and good monsoon, this is the most exciting news that will rejoice the realty sector. Homebuyers can feel some relaxation in monthly EMI and it is a good move when developers are offering ready-to-move-in units. Hope banks will also pass the benefit to the homebuyers quickly. 

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