Real Estate Industry Welcomes RBI’s Move, Seeks More Initiatives to Revive Indian Economy
The Reserve Bank of India (RBI), in its fourth bi-monthly monetary meet held on October 9, 2020, has decided to keep the repo rate unchanged. This is the second time in a row the apex bank has kept the key rates unchanged. Here is what the real estate industry said:
Dr. Niranjan Hiranandani, President (National) NAREDCO and Assocham
It affirms our beliefs that the worst is over for the Indian economy. The RBI governor also confirmed that the contraction in economic growth witnessed in the April-June quarter with 23.9 percent is behind us. He also accepts that growth is likely to pick up in the second half of the fiscal and enter into the positive zone in the January-March quarter.
Further reduction in key interest rates was not a possibility at this juncture. The RBI’s decision to extend the scheme for co-lending to all NBFCs, HFC in respect of all eligible priority sector loans will allow greater operational flexibility to the lending institutions and is much welcomed.
Since February last year, the monetary policy committee has cut the repo rate by 250 basis points. Particularly this step would benefit borrowers of higher value loans. It would ensure that more credit is available to borrowers. This move is a much appreciated step recognising the role of the real estate sector in generating employment and economic activity.
The RBI has through its proactive measures taken honest efforts to provide access to easier credit to smaller businesses. However, we believe further steps would be needed to revive the economy.
Satish Magar, President, CREDAI National
Through the Monetary Policy Committee announcements, RBI continues to maintain an accommodative stance while focusing on economic revival. The steps to control retail inflation and positive agricultural outlook with record production shall aid in recovery from COVID related stress albeit to a very small extent. The move to extend co-lending scheme to NBFCs & HFCs may infuse additional liquidity; however, we feel the strict due diligence norms and eligibility criteria will not benefit the Realty sector.
The linking of housing loans to LTR is a welcome step and may play a significant role in boosting demand in affordable housing segment. Now that RBI has recognized realty sector as the largest employer, it should also announce steps that are imperative and crucial for the sector’s survival and then introduce measures that will aid the sector’s revival. The extension of moratorium and making all accounts that were SMA 1 & SMA 2 as on 01 March 2020 eligible for restructuring are few of CREDAI’s demands to mitigate COVID related stress on businesses which should be considered by the government and provide support to the distressed sector.
Anuj Puri, Chairman – ANAROCK Property Consultants
Amidst its efforts to curb inflation – currently hovering above 6% – RBI, as expected, has kept both the repo rate and reverse repo rates unchanged at 4% and 3.35% respectively while maintaining an accommodative stance.
With real estate demand gradually seeing some green shoots of revival, especially in the wake of reduced stamp duty charges (in Maharashtra) and developers discounts and freebies, reduced repo rates would have given an added boost just before the upcoming festive season. But with consumer inflation still trending at the upper end of the apex bank’s band, and the policy repo rate also being substantially reduced by 140 basis points in 2020, today’s move was expected.
On a positive note, RBI’s move to rationalize risk weightage on home loans and linking housing loans risks only to loan-to-value is a welcome move. This announcement thus will definitely encourage banks to lend more to individual homebuyers without feeling the stress on their balance sheets. In the current.
Ramesh Nair, CEO & Country Head, JLL
RBI is clearly looking through inflation giving more priority to growth, bearing in mind that inflation is led by supply chain disruptions. India’s GDP contracted by 23.9 percent in the April-June quarter of 2020. But the future quarters are expected to be better with the RBI forecasting GDP to contract by 9.5% in FY 2021. Importantly, the Central Bank believes that GDP growth may turn positive by the fourth quarter.
The headline inflation rate was recorded at 6.7 percent during April-July 2020 due to strong supply-chain disruptions. This is above the outer limit of RBI’s medium-term inflation target 6%. The Central bank continues to maintain its accommodative stance to allow elbow room for further policy interventions if required. Thus, the repo rates remained unchanged at 4%. So far, the RBI has slashed rates by 115 basis points this year to support the economy and real estate sector in particular, amid the COVID-19 pandemic.
RBI has rationalized risk weights for all new home loans which will be availed until 31st March 2022. Unlike the existing system where it was linked to both size of the home loan and loan to value (LTV), it will now be linked to only LTV of home loans. This is timely and a step in the right direction and is expected to provide a fillip to housing loans, thus having a positive impact on the residential sector.
Manju Yagnik, Vice Chairperson, Nahar Group and Vice President NAREDCO (Maharashtra)
Indian Real estate is seeing a good revival with a slew of measures like reduced stamp duty and ongoing developer discounts, the Apex bank decision to keep the Repo Rate unchanged at 4% is a welcome move which reflects its accommodative stance understanding the present economic conditions following the pandemic. With the timely reduction of stamp duty rates by the state government, with home loans available for as low as 6.9% we will surely see an upsurge in sales in the upcoming quarter for real estate.
As always the response of the government of India to the pandemic and with the phase-wise opening of lockdown resulted in a good rebound of our economy seeing a slow upsurge in the buying pattern of the customer. This will boost the Indian Real industry and is expected to contribute 13 percent to India’s GDP by 2025. The real estate sector employs the maximum number of people in the country after agriculture linking to 250 allied industries.
Siddhartha Mohanty, MD & CEO of LIC HFL
The RBI monetary policy announced today has been a significant step taken to ensure liquidity in the financial markets and also the availability of debt to specific sectors. Regulatory measures such as tweaks on risk weights for home loans aligning it to only the LTV’s, increase of exposure limits to individual retail and small business loans and extension of co-origination models to cover all NBFCs and HFCs will help the sector. In recognition of the role of the real estate sector in generating employment and economic activity, it has been rightly decided to rationalise the risk weights and link them to loan-to-value (LTV) ratios only for all new housing loans sanctioned up to March 31, 2022. The Monetary Policy announcement is overall a positive, growth oriented and will give further momentum to GDP growth.
Anshuman Magazine, Chairman & CEO – CBRE India, South East Asia, Middle East & Africa
The RBI’s decision of keeping the repo rate unchanged was on expected lines owing to the rise in inflation in recent months. However, they’ve maintained an accommodative stance which is positive for the economy. RBI’s decisions to relax LTV guidelines and rationalize risk weights for home loans will further encourage homebuyers and their review of the co-origination model between banks and NBFCs and extended the scheme to all NBFCs (and banks) will improve the flow of credit in the economy. We are hopeful that these measures will strengthen recovery in residential demand and support construction activity as well.
Ravindra Sudhalkar, CEO at Reliance Home Finance
The RBI’s stance to rationalize risk weightage on home loans is a welcome move. With all new housing loan risk now linked only to loan to the value, the rates will continue to be in check and hence encourage new buyers. The lower margin requirement on high value loans will boost demand for properties in metros, where the property prices are higher than other cities. Reduction of stamp duty in states like Maharashtra has already provided some relief to buyers, and if the RBI today had announced further lowering of interest rates before the festive season, it would have given a real big push to the buyer sentiment. The on-tap TLTRO facility extended to corporates till March 2021 will ensure liquidity flow in the system, and the benefits will also spill over to the real estate sector.
Surendra Hiranandani, Chairman and Managing Director, House of Hiranandani
Residential sales across cities are gradually reviving with the lockdown being lifted. We are optimistic that the upcoming festive season will trigger the home buying sentiment in the market as big-ticket purchases are planned around auspicious times. Given that the festive season is on, which is going to extend all the way up to December, it is also important that the interest rates are reduced drastically which will enthuse the home loan borrowers. Any further cut in policy rates would have definitely pushed the home buyers to firm up their buying decisions who were waiting for the perfect opportunity to invest in their dream home.
However, the decision to rationalise the risk weights of new home loans and link them to loan-to-value ratio (LTV) ratios is a move in the right direction and will help in providing fillip to the sector.
We are also hoping that the government will chart out fresh stimulus in terms of bold fiscal measures for the real estate sector in the near future to outperform its growth traction. Being one of the major contributors to the economy, the benefits provided to the sector will have a positive impact on the overall economic growth.
Kamal Khetan, Chairman and Managing Director, Sunteck Realty Ltd
Today’s RBI announcement of rationalizing risk weightage on home loans is a targeted intervention and comes at a time when the property sector is making a significant recovery across all the segments. The measure would provide a boost to the ongoing projects and inventory pick up for luxury developers. The homebuyers across all price-points will be able to access more capital with ease. Additionally, it would help the lender on the capital adequacy front and enable them to provide more loans. We expect RBI to extend the measure beyond March 2022 in the coming days.
Lincoln Bennet Rodrigues, Founder and Chairman, Bennet & Bernard Group
Any further rate cut at this point of time would have definitely added to the positive sentiment, however, at the same time, it is imperative for banks to reduce lending rates as this is the need of the hour to further see a boost in the real estate sector. As the Covid 19 situation has altered our way of living, this festive season is opportune for investors to look at Goa seriously for a second-home investment and destination for luxury homes. As a premium real estate developer and catering to the elite segment, we remain optimistic for this season too. We have already witnessed an increase in the number of enquiries for our luxury villas and properties in Goa that offer safety, privacy and luxury, all in one space.
Ankush kaul, President (Sales & Marketing) – Ambience Group
The decision to keep the key policy rates unchanged comes on expected lines. With the economy going through an intermittent phase, the optimism shown by the Apex Bank gives a much-needed solidarity to the industry. The industry in particular, stands to benefit due to the measures taken up so far. We are hopeful that the overall sentiments will improve with the upcoming festival season. Moreover, RBI’s stand to rationalize risk weightage on home loans is a step in the right direction. Homebuyers in the affordable, mid-income and upper middle-income housing segment will benefit immensely from this move.
Kaushal Agarwal – Chairman, The Guardians Real Estate Advisory
The status quo was on expected lines. The steep reduction in the rates over the past several months are slowly beginning to show impact on the ground. The move by RBI to link risks to loan to value will help banks shred the cautious lending approach. The move is bound to offer a much needed jump start to lending and liquidity cycle in the marketplace. The move is quite differentiated and going to be effective.
Arjunpreet Singh Sahni, Executive Director, Solitaire Group
Amid the dwindling economy as well as real estate sector struggling to cope up with weak demand due to the disruptions caused by the COVID-19 pandemic, we expected the RBI to further lower policy rate. However, we expect rate cut in the next policy review. We are hopeful of the affordable and mid-income housing market bouncing back on high growth trajectory on the back of the recent reform- oriented moves of the RBI.
Dr. Nitesh Kumar, MD & CEO, Emami Realty Ltd
Today RBI has once again considered the role of the Real Estate Sector in the economic growth of the country. With the new initiatives, Risk weights to be assigned to all home loans under as per loan-to-value on home loan make it safer and TLTRO would reduce cost of Borrowing for NBFCs this will boost the credit sentiments and bring much needed positivity in the sector. We can say it is good and expecting to give more stability to the economy.
Bhushan Nemlekar, Director, Sumit Woods Limited
The RBI Policy decision is in the right direction. I feel now with the upcoming festive season, banks will offer better rates to the customers for housing loans. We hope that the bank takes cue from RBI’s accommodative stance and passes on the benefit to the home loan buyers.
Deepak Kapoor, Director, Gulshan
RBI Governor Shaktikanta Das announced that the repo rate would remain unchanged at 4 percent and reverse repo rate at 3.35 percent. The apex bank has also announced that it is ready to take steps that will infuse liquidity to improve financial conditions. The market will eagerly wait for these steps as improvement in economic conditions of other industries will have a direct bearing on the real estate sector. The realty sector is already reaping rewards of the multiple steps taken by the government and low home loan interest rates extended by banks. RBI should have made some announcement to improve liquidity in the real estate sector, as many developers are facing the heat after COVID-19 led to a complete shutdown of operations. The optimism of RBI regarding economic growth is welcome, and we hope that the government pays attention to the requirements of the sector, which is the largest employer in the country.
Uddhav Poddar, MD, Bhumika Group & Founding Member, SCAI
The real estate sector is badly affected due to the pandemic, and it needs support from the banks. One of the biggest issues with some of the realtors is the liquidity issue, and we hope RBI will address it as it has announced to take steps to ease liquidity. One of the announcements that is beneficial for the sector is that the new housing loans to be linked to LTV only. We hope that the buyers will take advantage of the situation and realize their dream of owning a home.
Amit Modi, Director, ABA Corp & President (Elect) CREDAI Western UP
Even though the apex bank has kept the rates unchanged, but we still believe that there is room for financial institutions to cut down on their lending rates for their customers. during lockdown, the RBI reduced the repo rate which failed to bring cheer to the market, however now the stagnant rates today might have helped smooth the economy to some extent and the benefits of which are yet to be fully passed on to the customers.
Rajat Goel, JMD, MRG World
RBI has kept the repo rate unchanged at 4% and reverse repo rate at 3.35%, during its recent announcement with prediction of GDP decline about 9.5% for FY 21, which is on similar lines with prediction from rating agencies.Affordable housing segment has seen good number of enquiries from end-users amid the uncertain market conditions which is a sign of positivity. Apart from this, RBI’s decision to take steps for infusing liquidity remains awaited, which will prominently affect the overall sentiment of real estate sector.
Achal Raina, COO, Raheja Developers
The extension of lending limit for retail exposure from Rs 5 crore to Rs 7.5 crore along with reduction of risk weightage on home loans and linking it with LTV ratio augurs well for the real estate sector.
Ankit Kansal, Founder & MD, 360 Realtors
The recent decision by RBI to keep the repo & reverse repo rate unchanged underpins the accommodative policy by the government alongside reining the inflation rate. This should have an overall positive impact on the recovering Indian Real Estate industry as an accommodative stance should plug-in the liquidity crunch in the market. Likewise, managing inflation will control the cost. At the same time, the RBI has announced a sharp GDP decline of 9.5% for FY 21, which is in line with what has been predicted by most of the major international & domestic rating agencies. Now all eyes would be on how the government plans to combat the economic slowdown and boost demand. A host of steps in the form of capital injection, refinancing of banking institutions, policy impetus, subsidies, and discounts are required to see a faster recovery.
Yash Miglani, MD, Migsun Group
The real estate sector is enjoying the fruits of high consumer confidence for the past few months, and it will attain newer heights in this festive season. We were expecting the repo rate to remain unchanged, and the decision of the RBI it will have no impact on the sector in the current scenario. In the latest announcement, the provision of housing loan to be linked with LTV is going to help the buyers, and hence the sector will see more sales.