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Business News » India News

Real Estate developers hail RBI's rate cut decision, urge retail banks to pass on the benefit

Real estate developers have welcomed the decision citing the move would send out positive notional signals but will the banks pass-on its benefit. 

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Real Estate developers hail RBI's rate cut decision, urge retail banks to pass on the benefit
The reason why most banks are not really able to pass on the benefits of RBI’s rate cuts is that their deposit rates are still very high. Photo: PTI
Written By: Asit Manohar
Updated: Thu, Jun 06, 2019
02:22 pm
New Delhi, ZeeBiz WebDesk
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Buoyed by the RBI Repo Rate cut decision taken by the Monetary Policy Committee (MPC), real estate developers have welcomed the decision and believe that the move would send out positive notional signals. However, they said the apex bank needs to ensure that this actually happens at the ground level and the benefit is extended. On the change in RBI stand the industry insiders say stance change from neutral to accommodative by RBI indicates the cognizance about the current fragile business environment and we expect further rate cuts in times to come. 

Anuj Puri, Chairman - ANAROCK Property Consultants said, "As widely anticipated, RBI has once again reduced its key lending rate by 25 basis point. The lending rate now stands at 5.75, and this is the third consecutive rate cut since February 2019. Even though the Indian economy is perceived to be in the grips of a slowdown, the markets are quite bullish on Modi’s return to power with a thumping majority. This may eventually lead to mitigated risks in fiscal deficit - in all likelihood, it is sensing this that the RBI has made this rate cut." He said that as for the housing sector, this rate cut may send only send out positive notional signals - its real gain can be realised only if banks pass on the benefits to actual homebuyer borrowers. The apex bank will need to ensure that this actually happens at the ground level since there has been little evidence of such transmissions in the recent past.

"In the current scenario bereft with rising NPAs and the ongoing NBFC crisis, things look quite bleak at the moment. The reason why most banks are not really able to pass on the benefits of RBI’s rate cuts is that their deposit rates are still very high. This ultimately makes reducing interest rates to borrowers unfeasible," Puri added.

Parth Mehta, Managing Director, Paradigm Realty said, "The rate cut of 25bps was imperative to induce liquidity in the downward spiral economy on the back of all indicators showing slowdown like the peak unemployment rate, shrinking GDP rates, nose-diving auto sales numbers, etc. Since the CPI was well under 2.5% and recent crude prices dip, a higher rate cut would have been more cheerful for the markets. The stance change from neutral to accommodative by RBI indicates the cognizance about the current fragile business environment and we expect further rate cuts in times to come. Rate cuts shall enable affordability in terms of home loans and thus lowered EMI, lower GST, tax rebate for income up to Rs6.5 lakhs (including section 80C)  for the middle class as per as interim budget. All these shall give some sales impetus to real estate."

Manoj Gaur, MD, GAURS GROUP and Chairman of Affordable Housing Committee, CREDAI — National chapter said, "The benchmark lending rate cut by 25 bps to 5.75 per cent is a positive move for real estate sector before the union budget for FY 19-20. This move will surely benefit banks which eventually can ease Lending in the real estate sector. The third consecutive reduction shows positive signs which can surely enhance the demand for housing, marginally. Though the past cut wasn’t passed on to the consumers so we would have to wait and watch whether this time the consumers get the benefits or not."

Farshid Cooper, MD, Spenta Corporation, " Given the ongoing economic slowdown, with both the consumption and investment engines wavering, the third cut in the repo rate by 25 basis points is an encouraging move to stimulate the economy and will immediately spur a growth for sectors like real estate. Banks should reduce the lending rates and ensure that the home loan borrowers reap the benefits of this move. This would enable the borrowing to come down and make it more convenient for home buyers to purchase their dream homes. It will further improve sentiments and encourage demand for real estate and boost employment in the nation". 

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TAGS:
Real EstateReserve Bank of IndiaShaktikanta Das
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