Repo Rates Unchanged: Realty Sector Gives Mixed Reactions!

In its fifth monetary policy of the calendar year and third of this fiscal, the Reserve Bank of India kept the rates unchanged. With this decision, the repo rate stands at 7.25 percent, reverse repo rate at 6.25 percent, statutory liquidity ratio (SLR) at 21.5 percent and cash reserve ratio (CRR) at 4 percent. The apex body had already made three deductions in the key rate in this year by 25 basis points each time, giving a total deduction of 75 basis points to the repo rate and bringing it down to 7.25 percent from 8 percent in 2015 itself.

Owing to retail inflation that stood at an eight month high of 5.4 percent in June, CPI going up a bit due to food prices and irregular monsoon season affecting the country, no rate change was pretty much on the cards. However, the decision has still received mixed reactions from the real estate fraternity.

CommonFloor.com spoke to some leading players in the market to get their opinion. Here is what they have to say.

Calling it a careful decision by the RBI, Deepak Kapoor, President CREDAI- Western U.P. & Director, Gulshan Homz says, ”taking the current economic situation into consideration the decision looks just and in the final quarter of this calendar year, RBI might do another rate cut to better the sentiments.”

Reiterating the same, Manoj Gaur, President, CREDAI NCR, says, “Since the RBI has kept the status quo on policy front. This policy is on the expected line from the Apex Bank. In recent months, financial markets have experienced high turbulence due to the Greek crisis, the Chinese stock market slump. Considering hazy picture on Retail inflation, or consumer price index (CPI), too has inched up to 5.4% over the past month. Given the awaken sentiments in the market, but, RBI could have further pulled the wave by easing key rates a bit.”

Adding to it, Rajesh Goyal, Vice President CREDAI- Western U.P. & MD, RG Group states, “Tight macroeconomic situation of the country could be attributed as the reason for the apex body to maintain the repo rate. Also, with the onset of Navratri followed by Dussehra and Diwali, the festive season brings positive sentiments, so a rate cut is expected in the next session which is due on September 29.”

Looking at the more positive side, Owais Usmani, MD, Presidency Infraheights Pvt. Ltd. says, “It is a positive move as it indicates that interest rates will not go upward. We hope the era of interest rate hikes has ended, Confederation of Real Estate Developers. In line with market expectation, RBI has kept repo rates untouched thus allowing buyers to execute their plan of investing in property. Now they are sure that since rates will be constant, the EMIs will not increase either.”

”Dissatisfied” Lot’

Expressing dissatisfaction, Ashok Gupta, CMD, Ajnara India Ltd. says, “The way this sector is behaving at present, we were expecting the RBI to give us a much needed relief in the form of another rate cut. If not the repo rate, then atleast a cut in CRR would have increased a bank’s lending capacity, the benefit of which would have ultimately passed onto the consumers and enhanced liquidity in the market.”

Sharing similar view, Manoj Gaur, MD, Gaursons India Ltd. says, “We expected that the RBI would cut rate by at least even 25 basis points which would have been good for the real estate sector.”

”It is not good news for the sector; however we are still hopeful and believe that RBI will understand the pain of people who are not being able to buy homes. We expect that RBI will also work towards housing for all of the government and come up with rate cuts that will be in line with the government’s oft-quoted policy,” informs Sanjay Rastogi, Director, Saviour Builders Pvt. Ltd.

Restating, Gaurav Gupta, General Secretary, CREDAI RNE says, “Reduction in repo rates would have been a welcome step as currently economy needs a booster to come out of sluggishness. Inflation numbers are also comfortable and monsoon is also good.”

Showing equal discontent, Anil Kumar Tulsiani, CMD, Tulsiani Developers and Construction Ltd. says, ”We expected a cut because the sector is going through a low phase, sales volumes are low. By reducing the interest the RBI could have given a required boost to the sector.”

As per some, rate cut was essential as it would have made sure that the bank will lower the interest rate which did not happened last time. According to Deepak Kapoor President CREDAI Western U.P, ” RBI could have taken this opportunity to kick start the realty sector by reducing the rate because the economy is doing well in the recovery phase, the inflation is also under check fuel prices have gone down and overall growth rate is steady.”

Adding to Kapoor’s viewpoint, Arjunpreet Singh Sahni, Executive Director, Solitairian Group says, “A reduction in policy rates at this juncture would have been highly favourable for real estate industry which is reeling under low-demand pressure since long. It is more worrisome that despite three successive reductions in Repo Rate this year, no significant cut in home loan interest rates has taken place and so the middle class which forms a major chunk of home buyers in the country still remain discouraged from participating in real estate market.”

‘Hopeful’ Lot

Pradeep Jain, Chairman, Parsvnath Developers is of the opinion that, ”In the backdrop of high consumer price inflation, it was expected that the RBI would keep the rates unchanged. However, going forward as the consumer price inflation eases/lowers, the RBI should cut rates in its monetary policy in order to revive the sentiment of the real estate sector and to prop up growth in the economy.”

Adding to it, Aman Nagar, Director-Paras Buildtech says, “We welcome the pronouncement for a better prospect as it seems that it want to create a conducive environment for the economic growth and anticipate for a positive outcome.”

Analysis by Rishi Mehra, Deal4loans.com: Bank of India left its key rate unchanged at 7.25%. This was in line with expectations, however there was a dovish bias in the wordings of RBIs statement, which says that it is looking for emerging room for more accommodation.

RBI is awaiting better assessment on recent spike in consumer inflation, i.e. if this inflation increase is transient or permanent. RBI will monitor monsoons and US Federal Reserve rate hike closely. It is also awaiting transmission of its front loaded rate cuts by the banks. The rates will also depend upon the banks ability to further transmission the dovish bias of monetary policy and the easy liquidity conditions. This means Interest rates on Home loans and Car loans will not increase from here. The rates for new customers are around 9.75% for Home loan.

The next and fourth review policy of this fiscal year is due on September 29th, 2015 and all the eyes and ears are now set on Mr. Rajan as how he takes the next policy review forward. Interestingly, the final festive season of the Hindu calendar year will also commence around that time.

As Praveen Tyagi, CMD, VVIP puts it, “Real estate sector in particular banks heavily on the final festive season of the calendar year, as most customers in India usually wait for this time of the year to come and invest in gold, automobile, shares and largely, property. Therefore, if the RBI also does a rate cut in its next review then the demand for property market will see a steep rise as home loans will be already cheaper and better deals will be made available to the customers.”