The Monetary Policy Committee in its second meet in the current financial year continued with the status quo on rates. NewsBarons connects with Real Estate Industry Leaders to share their views and opinions on the MPC announcement
RBI’s maintenance of an accommodative stance will help sustain homebuyer sentiments which were strengthening pre-second wave. Despite the present disruption, Real Estate has been one of the most resilient industries even amidst the pandemic and has been showing signs of recovery over the last few quarters. With the repo rate and reverse repo rate being maintained at a status quo of 4% and 3.35% respectively, banks and NBFCs will continue to render loans at reduced rates to homebuyers, thus supporting demand in the realty sector.
We also welcome RBI’s directed focus on infusing liquidity in the industry, specifically in sectors such as hospitality and tourism, which will further benefit the overall realty sector
The RBI move to hold the repo rate at 4% in its monetary policy review is along expected lines. Considering there have been widespread economic ramifications of the various lockdowns announced by states to contain the second wave of the virus, this was the appropriate thing to do. However, we expect the banking regulator to announce monetary support to the NHB to revive growth in the real estate sector, which is the country’s second-largest employment generating sector in India.
The developer community might find some support from the central bank’s decision to launch the Resolution Framework 2.0, under which the RBI will expand coverage of borrowers to INR 50 crore, from the earlier INR 25 crore. In a move that augurs well for small businesses in the country that are reeling under the impact of the second wave, the RBI has extended the special liquidity facility of INR 16,000 crore to SIDBI to support MSMEs
Due to the second wave of COVID-19 and the lockdown restrictions imposed in various States, the monetary policy committee’s decision to keep key rates unchanged at 4% was on expected lines. This move is a much-appreciated step recognizing the role of the real estate sector in generating employment and economic activity. With the interest rates at a record low, the Government will continue taking affirmative measures as long as it is necessary to revive the economy and mitigate the impact of the second wave of the pandemic
It was expected that RBI will keep the Repo Rate unchanged and avoid temptations to further inject liquidity due to the downside risk of inflation. As steel, cement, and crude oil prices are increasing, there is a mounting pressure of inflation and maintaining an accommodative stance is a benign choice. Coming to real estate, pent-up demand, structural transformations, and a healthy economic outlook ( ~ 8-9% for FY 22) will drive the market in a positive direction. However, governing agencies should look into rising prices of key construction materials such as cement and steel. Prices have hiked exorbitantly in recent months and if not contained, it will undermine and stall a lot of construction activities
The RBI and especially the MPC are to be commended for maintaining an accommodative stance for the sixth consecutive time now. Their approach towards tackling the situation created by the pandemic and steps taken to help revive the economy will go down in history as being one of the finest. Keeping in mind the disastrous COVID-19 second wave, a slight reduction in the key rates would have been widely celebrated. The reduction would have helped spur growth in demand for real estate assets, which has been severely hit as a result of the pandemic and subsequent lockdowns. Apart from the reduction in stamp duty charges in some parts of the country, the all-time low housing loan rates have given the much-required fillip to sales activity in the last couple of quarters. With the temporary reduction in transaction costs being withdrawn, in states like Maharashtra, the expectation amongst stakeholders of the industry is that the banks should now further sweeten the lending rates, at least till such time that the economy gets back to the pre-COVID levels
We thank the RBI for continuing with their accommodative stance. The second wave of the pandemic and intermittent lockdowns across major cities has led to economic uncertainties across the country. There is also uncertainty around the vaccination and the increasing input costs is having a catastrophic impact on the survival of few businesses. Therefore, we urge the Central Government to address the deteriorating health of MSMEs and various other sectors which have been severely impacted by the second wave of the pandemic. The low interest rates have been a crucial factor in the revival of the demand in the real estate sector. Looking at the record transactions in the previous quarters where the homebuyers took advantage of the stamp duty benefit before the March deadline, we urge the State Government to reconsider their decision on the stamp duty waiver in interest of the homebuyers again
A rate cut would have been beneficial for the consumers and would have given a boost to current demand uptick that we have seen recently. Residential demand is reviving in the pandemic context and this needs to be fostered. However, the prevailing home loan rates which are a record low are already enticing for homebuyers. For any investor, it’s a time of great opportunity and for the end-customer, it’s a good time to buy. Going forward, we would also like to see reduction in stamp duty & registration charges to push demand further in the real estate sector that forms the backbone of several other sectors. We urge the government to introduce measures that truly uplift the real estate sector which also contributes significantly to the country’s economic growth
It goes without saying that the real estate industry’s perennial hope is fixed on lower interest rates. Any further reduction of the repo rate would have aided in ensuring adequate flow of capital in the market. However, home loan interest rates have already gone down substantially in the recent past, and are presently at an all-time low. Homebuyers will continue to take advantage of the lowest ever home loan interest rates and with the emerging need, the demand for housing is going to sustain as it is a safe-haven asset and many fence-sitters will take the plunge and make the purchase once the situation normalizes. There was a major revival in the residential sector recently despite the pandemic last year. The second wave of the pandemic may have disrupted the recovery of the real estate sector to some extent but we expect a strong revival in the second half of this fiscal and the long-term outlook remains healthy. As the states are in the process of easing lockdowns, the real estate industry would need all-around support and quick assistance to pick up their business thread again
https://newsbarons.com/rbi-monetary-policy/monetary-policy-june-2021-real-estate-industry-outlook/
