Repo Rates unchanged: Realty stalwarts react
With Finance Minister Arun Jaitley stressing on reviving growth momentum and curbing inflation, RBI in its second bi-monthly monetary policy has maintained its hawkish stance and for the second time in the row has kept the repo rate unchanged at 8 per cent. The decision was well-received by the real estate fraternity.
“The recent decision on keeping the rates unchanged was widely anticipated by developer community, as we were aware that the economy has gone past recession and is on consolidation mode. Any change in rates is not feasible as we have reached the zenith of high rates of interest prevailing in the market,” says Pankaj Bansal, director of M3M India.
Even though this stance has paid off in reigning in spiralling inflation, the borrowers who have been paying high interest rates will have to wait for the rates to fall.
Explaining the same, Abhay Kumar, CMD, Griha Pravesh Buildteck Pvt Ltd says, “With the economic indices improving and inflation curbing in the near future, the RBI may work on bringing down the interest rates. So while we see the short term pressure on the borrowers to continue, we are hopeful it will bolster the overall economic growth which in turn will percolate to the realty sector. And that is what we want – the sector to revive and demand to strengthen.”
When the repo rate is raised, banks are compelled to pay higher interest to the RBI, which in turn prompts them to raise the interest rates on loans they offer to customers. “The customers then are dissuaded in taking credit from banks, leading to a shortage of money in the economy and less liquidity. Therefore, keeping the repo rate unchanged will allow some breathing space to the banks and ultimately the customers. Also, this can help in curbing the rising inflation in the economy,” says Kamal Batra, Chairman, Buniyad Group.
Reiterating the same, Ashok Gupta, CMD of Ajnara India Ltd. says, “the repo rate being kept unchanged at 8 percent was pretty much anticipated by the market as the new government setting up will like to start well.”
But the worrying part for the industry is the outlook and the hints in the policy that in the wake of elevated inflation, the interest rates may be revised again. However, the reduction in Marginal Standing Facility rate will help the banks to reduce short-term interest rates and enhance their lending operations during the busy season, especially at a time when there is a significant reduction in the flow of funds to productive sectors of the economy, adds Gupta.
Sharing similar views, Pradeep Jain, Chairman, Parsvnath Developers Ltd says, “since the RBI has kept the policy rate unchanged, the policy is on the expected line from the Apex Bank. Now all eyes are on the first budget by Modi Government where we expect some favourable reforms for real estate sector like infrastructure statue to affordable housing, widening of FDI norms automatic route for ECBs, Interest Rate Subvention to home buyers and Priority Sector status to construction Loan for Affordable Housing Project, defining maximum stamp duty on affordable housing.”
Before taking its view on the rates, RBI seems to be in wait-and-watch mode till the budget is tabled. Thus, all eyes are now set on Arun Jaitley’s budget that will be tabled in the first week of July.
