New Delhi: As widely expected by economists and others, the Reserve Bank of India cut Repo Rate by 25 basis points today to spur boost spending and revive the sagging economy. This cut comes just in the middle of festive season and may result in slightly better off-take of property in the country, provided banks pass on the benefits to the customers quickly.
“The repo rate cut of 25 bps to 5.15% announced today is in line with expectations. Considering that the Aug 2019 CPI came in at 3.21% – well below the medium-term target of 4% – RBI had room for such a rate cut. It can probably go some way in improving consumer sentiments ahead of the festive season, which is a crucial quarter for the real estate sales. However, much depends on how efficiently banks transmit the benefits to their home buying borrowers,: said Anuj Puri, Chairman, ANAROCK Property Consultants.
An efficient transmission will lower the cost of capital not only for consumers but also for developers, making room for price revisions and further discounts. Some banks have agreed to link their lending rates to the Repo rates, but all major lending institutions need to follow suit, he added.
However, Shishir Baijal, Chairman & MD, Knight Frank India said the cut is not in line with expectations. “While it is the fifth consecutive rate cut this year, it is insufficient to support the flagging consumer demand. The stressed real estate sector was looking up to a strong rate cut and sector specific lending provisions to improve both liquidity scenario and consumer spending ability. As has been witnessed so far, a cumulative 110 bps REPO rate cut over the last 6 quarters has failed to stimulate consumer demand as well as private investment in the economy. On this backdrop, another 25 bps rate cut by Reserve Bank of India (RBI) comes as a disappointment, more so for the real estate sector,” he said.
Anshuman Magazine, Chairman & CEO, India, South East Asia, Middle East & Africa, CBRE welcomed the frate cut. “The Repo rate cut of 25 basis points, is the fifth in a row rate cut by the Reserve Bank of India and takes the overall reduction of interest rates to 135 bps. The rate cut is expected to complement other fiscal measures such as the corporate tax rate cut that was announced last month to propel GDP growth. The timing of the cut is crucial as it is expected to spur real estate demand and consumption ahead of the festive season as it is an important period for investment/ consumption across sectors,” he said.
Niranjan Hiranandani, President, NAREDCO, called for more drastic steps to help the private sector and real estate companies in the country. “With the short term liquidity squeeze prevailing in the economy, even positive net worth companies across the industries are turning into the negative balance sheet. The current economic scenario makes it the right time for RBI to announce its one time roll over scheme similar to that was rolled out during the Lehman crisis in 2009 under the global slowdown scenario, which shall act as remedy to the ailing companies,” he said.
“The 25 bps rate cut is definitely a welcome move showing the alignment of monetary and fiscal policy initiatives in the backdrop of a downward revision in the GDP growth to 6.1% for FY 20. The consecutive rate cuts have been a succor for the real estate sector thereby making it the most opportune time for buying homes. This has been reflected in the continuous improvement in the residential sales that registered a 14% Y-o-Y growth in sales during January- September 2019 as compared to the corresponding period in the previous year,” said Ramesh Nair, CEO and Country Head-JLL India.
The RBI has cut the Repo Rate four times in this year and this one makes it the fifth cut, aggregating to 135 basis points. The Repo Rate now stands at 5.15 percent.
“A reduction in interest rates means more cost-effective home loans for buyers when India’s key property markets already offer them great ready-to-move-in options to pick from, on affordable rates,” said Dhruv Agarwala, Group CEO-Housing.com/ Makaan.com /PropTiger.com
“Affordable housing projects were already getting good response but now with the latest rate cut, the buyers will get more benefit. It is always heartening to see the EMI burden coming down as we want our buyers to enjoy their dream home with relaxed mind,” Pradeep Aggarwal, Co-Founder & Chairman, Signature Global.