New Delhi: The Reserve Bank of India (RBI) has kept the Repo Rate unchanged at 5.15 percent in its monetary policy review today, dashing hopes for further softening of home and other loans.
Repo Rate is the rate at which the RBI lends money to commercial banks and it is when Repo Rate goes down that commercial banks get headspace to reduce interest rates of home loans, auto loans and others.
It was expected by the industry and businesses in the country that the RBI would cut the Repo Rate by at least 25 basis points today.
Interestingly, the RBI slashed the GDP growth forecast for the country to just 5 percent from 6 percent anticipated earlier for the current fiscal.
The RBI has reduced Repo Rate in five consecutive reviews earlier this year, resulting in a cumulative decrease of 135 points. However, the commercial banks have not passed on entire benefits of these cuts to their customers by way of lowering interest rates.
“Contrary to overall expectations, the RBI kept the repo rates unchanged to 5.15 percent while maintaining an accommodative stance. From a real estate point of view, a rate cuts are obviously always welcome as they help improve overall sentiment. Also, lag-less transmission of rate cuts to retail borrowers as RBI has mandated banks to directly link interest rates with repo rates. The expected rate cut of 25 bps would have caused home loan values to fall below 8 percent for first time ever,” said Anuj Puri, Chairman, ANAROCK property consultants.
“Lower interest rates would have helped push up credit demand and investment in the economy, aiding overall economic growth. It would have provided much required reprieve to some ailing sectors like auto and real estate. RBI has probably taken the cautious approach of wait and watch to se the effect of past rate and cuts and also assess the inflation trajectory,” said Shishir Baijal, CMD, Knight Frank India.
“A repo rate cut would have been welcome as it would have lifted industry sentiments. The growth trajectory of the real estate sector will depend on the successive transmission of rate cuts to the end consumers and translate into lower EMIs. Lower interest rates will also bring back fence-sitters who were waiting for the perfect opportunity to invest in their dream home,” said Surendra Hiranandani, CMD, House of Hiranandani.
“The Reserve Bank of India (RBI) stayed away from taking a cue from their global counterparts and decided not to continue with repo rate cut for the sixth time in a row, which was the need of the hour to revive the slowing economy. But the Monetary Policy Committee (MPC) decided to take a pause after five consecutive rate cuts this year. MPC lowered the repo rate by 135 basis points between Feb-Oct, 2019. The benefit from the previous rate cuts are yet to play out completely and the real estate industry is still reeling under the liquidity crisis,” said Niranjan Hiranandani President NAREDCO.