Real Estate Industry expected further Rate Cut by RBI in the Monetary Policy review

By Accommodation Times News Services

rbiReserve Bank of India today declared it monetary policy, RBI Governor Raghuram Rajan in his monetary policy review kept the key rates, including repo rate and CRR unchanged at 6.5 per cent and 4 per cent respectively. The Real Estate industry is not too happy with the central bank’s decision and has expressed their disappointment.

Mr Ashish Raheja, Managing Director, Raheja Universal, said, “The RBI Governor in the second bi-monthly monetary policy kept the interest rates unchanged. The sector was hoping for a cut in the policy rates which in turn would have given impetus to the demand for the real estate sector. However, we believe he has given importance to the economy where inflation is seen with an upward bias and tried to address the same. The rate cuts undertaken by the central bank in its previous policy reviews still leaves some space for the banks to pass on the benefits to the consumers. Hence, we believe the banks needs to be proactive on passing on the benefits to the consumers.”

Mr. Shishir Baijal, Chairman & Managing Director, Knight Frank India Pvt Ltd, said, “The sector is disappointed with no change in policy rates and it will take the real estate sector much longer time to come back on the rails. The residential property market has not been doing well and there was expectation that RBI would reduce the policy rates that would have given a boost to the residential property market. On a broader note the RBI’s stance of not reducing the policy rates could have emanated from the banking regulator’s move to reduce inflation to below 5 per cent by March 2017. The fact that CPI moving up to 5.39 per cent and wholesale inflation turning positive, could be the factors that may have prompted the banking regulator to leave the policy rates unchanged. Crude prices moving up exponentially is expected to further add to inflationary pressures.”

Mr. Neeraj Gulati, Managing Director, Assotech Realty stated, “The Reserve Bank of India’s move to maintain status quo on key policy rates was on expected lines. A cut in rates would have certainly improved the market sentiments too and provide necessary impetus to buyer’s sentiments as well. However, in the longer run we definitely foresee rate cuts that will boost the housing demand in India. We have seen few banks passing rate cut benefit to the home borrowers but we expect more banks to follow the same trend in the coming months. It is evident that inflation is trending upwards. Coupled with this, capital investment remains sluggish and supply constraints continue to act as a dampener. All this has left very little room for the RBI to manoeuvre.”

Mr. Vineet Relia, Managing Director of SARE Homes, says, “RBI Governor Raghuram Rajan’s decision to keep the repo rate unchanged at 6.5% is disappointing, though not unexpected. As the RBI had already announced a 25 basis point repo rate cut in its April policy review, and with retail inflation rising to 5.39% in April from 4.83% in March, expectations of a rate cut were extremely muted. Since retail inflation is expected to rise due to the rally in crude oil and other commodities prices and implementation of the 7th Pay Commission recommendations, it is clear the RBI is focussed on lowering retail inflation to 5% by March 2017. Nonetheless, since demand in real estate and allied industries remains sluggish, a rate cut could have improved liquidity and created renewed interest in property purchase. But with the RBI stating its monetary policy stance is “accommodative”, one is hopeful a rate cut may be in the offing in the latter half of 2016.”

The second bi-monthly policy announcement while maintains status quo on the rates, is accommodative in approach. We continue to be optimistic as the banks still have room to pass on the benefits of the previous rate cuts undertaken. We believe the steps taken by the governor are on the right path to address the economy where the inflation is likely to witness an upward bias,says Mr. Kishore Bhatija, Managing Director, Real Estate Development, K Raheja Corp.

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