Repo rates unchanged: Industry gives mixed reaction
At a time when country’s GDP has touched a nine year low of 4.5 per cent, Reserve Bank of India’s (RBI) decision to keep the repo rates unchanged has come as a surprise for the entire real estate fraternity. In the first bi-monthly monetary policy statement for 2014-15 released this morning, many in the industry were expecting cut on the interest rates. Thus, the decision has garnered mixed responses from the sector. In a recent decision, RBI kept the repo rate unchanged at 8 per cent and the cash reserve ratio at 4 per cent.
“The decision of the RBI to keep key policy rates unchanged was widely anticipated by the real estate industry. With inflation already in check, we see the decision of the bank to hold on to key interest rates as a prelude to the gradual easing of interest rates in the days ahead. As the economic recovery process gathers strength and both micro and macro-economic indicators improve further, we believe that it is only a matter of time before home loan rates come down giving further boost to consumer sentiments and real estate demand,” says P Sahel, vice chairman of Lotus Greens.
Griha Pravesh Buildteck Pvt Ltd CMD Abhay Kumar said the RBI has taken a ‘guarded step’ by keeping the rates unchanged. “With the economic indicators being stable and inflation coming down, rate cut would have attracted more buyers to the sector, who are already struggling under the burden of high Equated Monthly Installments (EMIs). However, in the near future the governor has hinted at lowering rates if the macro conditions do permit which will boost the market sentiments.”
Anuj Puri, chairman & country head, JLL India is also positive about the decision. He said, “the fact that the repo rates have remained unchanged is inherently positive. Even a marginal increase would have added further pressure on already struggling rate-sensitive sectors such as real estate, autombiles and banking, and negatively impacted borrowing sentiments of consumers. As things stand now, consumption is already very low in these sectors. Instead of looking for rate cuts in the RBI policy, the real estate sector will keep a hawk eye on decreased inflation. When this happens, it is certain that the RBI will announce rate cuts which will benefit the real estate sector as well as other industries.”
Reiterating the same, Kushagr Ansal, director, Ansal Housing said RBI has taken a very bold step. However, now it need to be on alert.
“There have been signs of improvement in the retail and manufacturing industries. This has what made the RBI to keep the repo rate unchanged. But these are still early days of growth symptoms if we look at the overall condition of the economy. So, keeping the rate unchanged is a very bold step and RBI still needs to be on alert.”
Amdist these positive sentiments, some developers are hopeful that RBI would soon cut the key policy rates. “We were expecting a cut in the rates by RBI. We know for the apex bank, the priority is to tame inflation but it should not hamper growth. For real estate sector in particular, conditions are already adverse as country is approaching general elections. Any cut in key rates today would have boosted the sentiments and could have impacted demand. We believe RBI would consider our concerns as well and would cut rates significantly,” said Aman Agarwal, director, KV Developers.
Several in the industry also think that the decision to keep the repo rate unchanged is ‘no profit – no loss situation’ for real estate market.
Rupesh Gupta, director of JM Housing said, “The move to keep the repo rate unchanged will be seen as a no profit – no loss situation for real estate market. The primary idea behind the repo rate is to restrain the inflation from rising, but looking at this news, RBI now needs to be more cautious as they have taken this step.”
With this decision, RBI has certainly given some developers a reason to cheer in the Navratraseason, while some are looking forward to RBI next monetary review for the rate cut!
