Developers believe by keeping the repo rate unchanged, the central bank has taken the step towards the right direction in the current circumstances.
Real estate developers hailed the RBI move to maintain status quo on key policy interest rates in its policy meeting on Friday, and said that by keeping the repo rate unchanged, the central bank has taken the step towards the right direction in the current circumstances. With this policy stance, there is a growth-oriented approach which was much needed as the second wave of Covid ebbs.
Surendra Hiranandani, Chairman and Managing Director, House of Hiranandani, said, “While the sector has been severely impacted in the second lockdown, the problems have been aggravated with a considerable rise in the cost of raw materials such as steel and cement. In such a scenario, an unchanged repo rate makes more sense than an increased one which would have added more pressure on the sector.”
However, “we also need to be mindful of the impact on prospective home-buyers due to the uncertain conditions. These set of buyers are apprehensive and have instead chosen to wait to buy a home. There is a need for stimulant policy measures that would enhance liquidity for the sector, ease credit provisions and increases buyer’s confidence. Any announcements in these forms would have been much appreciated,” he added.
Industry experts said recovery in residential real estate that was witnessed during the January-March 2021 quarter was impacted by the lockdowns introduced to control the pandemic resurgence.
“Though the competitive mortgage rates are expected to provide long-term support for sustained growth of real estate, overall economic recovery leading to job and income growth will be contributing factors for housing demand. We believe that low home loan interest rates, realistic property pricing, the focus of developers on project completion and economic recovery will take the residential sales in all likelihood to better levels than 2020,” said Dr Samantak Das, Chief Economist and Head Research & REIS, JLL.
Thanking the apex bank for continuing with the accommodative stance, Pradeep Aggarwal, Founder & Chairman, Signature Global Group, and Chairman, ASSOCHAM, National Council on Real Estate, Housing and Urban Development, observed, “The second wave and increasing input costs are having a devastating impact on the survival of many businesses. The RBI has rightly taken steps to address the deteriorating health of MSMEs and various other sectors affected severely by the second wave. Real estate always seeks low home loan interest rates, and the RBI has helped the sector by maintaining the status quo. Buyers should take advantage of the current situation because later prices might go upwards under the pressure of increased costs.”
Some developers believe that increasing the maximum aggregate exposure threshold under resolution framework 2.0 will largely help individual borrowers and MSMEs as they can now opt for restructuring of loans up to Rs 50 crore.
Akshay Taneja, MD, TDI Infratech, said, “The bi-monthly review of Monetary Policy has kept the repo rate unchanged, but increased the maximum aggregate exposure threshold under resolution framework 2.0. This will largely help individual borrowers and MSMEs as they can opt for restructuring of loans up to Rs 50 crore. Real estate being the second largest employment generating sector largely depends upon ancillary industries. Realty being perceived as an asset along with low home loan interest rates will be motivating buyers gradually to invest, however measures like stamp duty reductions would be the right kind of push in uncertain times like these, as these relaxations would come with a definite timeline.”
Developers also urged the RBI to take industry-specific steps.
Uddhav Poddar, MD, Bhumika Group, said, “While it is acceptable that the repo rate remains steady, the need for industry-specific steps cannot be overlooked. Buyers had started returning to the real estate market, but as second wave hit us, the demand has once again slowed down. Hence to spur demand, interest rates need to be further reduced, thereby making homes and realty assets more attractive with lower EMIs.”
Although not much was done for real estate in the latest policy meet, some developers believe the previous announcements will certainly help the sector.
Prateek Mittal, ED, Sushma Group, said, “Looking at the MPC, it’s evident that the central bank is bullish on the economy. The position radiates confidence in the economy’s growth, and it has taken steps to support numerous companies and sectors. While actions were needed for the real estate sector too, it is sufficient to implement the announcements made during the last few months to make progress.”