Realtors Bullish on more Rate cuts from RBI; Urge Banks to cut Home Loan Rates

The Reserve Bank of India on Tuesday reduced the repo rate by 0.25%, thereby taking the total reduction since January last year to 150 basis points.

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The Reserve Bank of India on Tuesday reduced the repo rate by 0.25%, thereby taking the total reduction since January last year to 150 basis points.

Real estate developers and experts have urged banks to pass on the benefit of RBI’s latest rate cut to consumers for giving a boost to the sector. With inflation under control and an expected normal monsoon this year, realtors are hoping for more such rate cuts during the year.

The Reserve Bank of India on Tuesday reduced the repo rate, or the rate at which it lends to the banks, by 0.25%, thereby taking the total reduction since January last year to 150 basis points. However, the banks have only passed on about 60 bps benefits to the consumers till now.

Industry body CREDAI is hopeful that home buyers will get at least a 50 basis point cut in home loan rates. “The most exciting part of this announcement was governor making the comment that the RBI will push banks to actually cut the rates on lending for home loans and automobiles loans,” said Getamber Anand, President, CREDAI National.

“This news augurs well for the sector that has also witnessed the passage of the real estate regulation bill and REIT,” said Shishir Baijal, Chairman and Managing Director, Knight Frank (India). “We hope that the banks will pass on the benefit to the consumers.”

Niranjan Hiranandani, MD, Hiranandani Communities and Founder – President NAREDCO – Maharashtra, said RBI’s stance appears to be ‘accommodative’. “I see further scope for rate cuts going ahead, subject to good monsoon and improved transmission of rate cuts to end users,” he said.

Finance ministry and RBI should ask all banks to transfer the benefits immediately to help the end consumer, rather than help in buffering the bottom lines of the bank, according to Amit Modi, Director ABA Corp and Vice President CREDAI Western UP.

“Cheaper loans for home buyers will reduce EMI burden on buyers which is likely to see renewed interest in residential property purchase,” said Vineet Relia, Managing Director of SARE Homes.

The year 2016 has been many positive policy measures to revive the sector in the form of taxation related clarity on REITs, passage of the Real Estate Regulatory Bill, FDI in ecommerce and retail helping brick-and-mortar retailers to come on a level playing field with e-commerce giants and tax incentives announced in the budget for affordable housing.

Anuj Puri, Chairman & Country Head, JLL India feels with the mechanism of determining lending interest rate switching towards MCLR (as enforced by RBI), banks can now be more adept in passing on rate cut benefits to borrowers, while also giving some clarity on the future course of interest rate movements – both of which will help borrowers to plan their EMI outgoings.

State Bank of India, HDFC Bank, Punjab National Bank, Bank of Baroda and Canara Bank had announced cuts in lending rates last week as a new rule to came into force.

Yash Gupta, Country Head, Hines is hopeful this trend to continue over the next few quarters. “Given the positive trend we expect the housing demand to grow,” he said.

According to RK Arora, chairman, Supertech Group, the commitment of the RBI to make borrowings cheaper and its forecast of a healthy economy are the needs of the hour for building confidence in investors and creating job opportunities which only would create more demand and supply.

Rajeev Talwar, CEO, DLF feels going forward, a benign inflation outlook and low investment demand gives RBI the leeway to further cut interest rates. “We expect banks to soon start lowering lending rates and this, along with the government’s push to the housing sector, should reinvigorate demand in this critical segment of the economy,” he said.

Here is how other experts reacted to RBI’s latest rate cut:

Kapil Wadhawan, CMD, DHFL

The monetary policy has addressed the liquidity constrains of banks by assuring a near neutral liquidity deficit through open market operations. In the back drop of Marginal Cost System introduced for banks recently, RBI has shown its keenness to reduce the time lag and allow interest rate gains to pass on in the economy to boost demand and supply.

We in the Home loan industry will be proactive in passing on the benefit of lower cost to the end borrowers and look forward to a very robust growth in the demand from retail home loan borrower. The Governments initiatives on Affordable loan too can gain substantially from this trend in lower interest cost.

Gaurav Mittal, MD, CHD Developers

The central bank’s decision to reduce repo rate by 25 basis points will make home loans cheaper, and also increase liquidity in the banking system. We are hopeful that the increase in the liquidity along with the improvement in the health of the economy will boost demand. Cheaper loans for home buyers and rising demand will create renewed interest in residential property purchase from end users.

Anshuman Magazine, Chairman & MD, CBRE South Asia

On the back of moderating inflation levels, controlled fiscal deficit and cautious economic sentiments, the RBI’s decision to pare key interest rates in its latest monetary policy review was largely expected by the industry. The rate cut is likely to help lower borrowing costs and support growth further in 2016. For the real estate sector this is particularly critical. It is expected that this benefit will be completely transferred to the borrowers, which will result in lower lending rates thus helping to revive housing sales.

Rajesh Prajapti, Managing Director, Prajapati Constrictions

The repo rate cut of 25 bps by RBI is a welcome move, but the developer community was expecting a bit more. It would have been much more beneficial had the RBI reduced the repo rate by 50 bps, which in turn would have facilitated the banks to further reduce the rate of interest.

Jason Kothari, CEO, Housing.com

The RBI’s decision to have a 25 bps cut in the policy rate in the first bi-monthly monetary policy review for the 2016-17 fiscal, which began on April 1, is a timely measure to increase sentiment, and we are hopeful that it will also result in a reduction in home loan interest rates.

This will likely positively impact home buying, provided the banks heed the RBI’s recommendation for a ‘better translation of its policy actions, into the lending rates by banks’. Also noteworthy is the RBI’s mention that that inflation objectives are closer to being realised and price-rise will be at around the 5% mark for the remainder of the fiscal year. The RBI has also retained its GDP growth forecast at 7.6% on the assumption of a normal monsoon, which can have a significant impact. This bodes well for the overall macro-economic climate for business in general, including the real estate sector.

Ashwin Sheth, CMD, Sheth Corp

In the first bi-monthly policy announcement, the RBI reduces the repo rates by 25 basis points to 6.50 percent is a welcome move. The accommodative stance and the indication towards further easing of policy rates will renew further interest in the real estate sector. Faster GDP growth and declining interest rates will help real estate companies generate more sales and propel the growth of the industry.

Ashish Raheja, MD Raheja Universal

We believe that there will be some renewed interest from prospective home buyers who were hit recently by the ready reckoner rate hike across Maharashtra. While this move is positive it is left to be seen whether banks will pass on these benefits to their customers.
Ravi Saund, COO, JMS Buildtech

It is actually a win-win situation for both the developer and the customer. The immediate benefit of a cut in lending rates is that the borrower’s loan eligibility increases. Also, a drop in lending rates means a reduction in EMIs which provides a relief to the customers. This move will increase the money supply in economy, economic growth and purchasing power of consumers.

Deepak Joshi, President and Chief Business Officer, Religare Housing Development Finance Corporation

As expected it’s a welcome move of RBI by cutting repo rate by 25 bps. This coupled with Marginal Cost of funds based Lending Rate – (MCLR) on which SBI has already taken a lead, will further reduce the lending rates in the market and increase credit off take. Also EMIs on retail consumer loans will further soften which will increase demand for auto and home loans.

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