RBI December Monetary Policy Highlights:

Status quo on rates, GDP projection, inflation outlook, 24X7 RTGS and more

Markets surged. Real Estate may see a boost.

On the expected lines, the Reserve Bank of India’s (RBI) Monetary Policy Committee (MPC) kept key policy rates unchanged while maintaining an ‘accommodative’ stance ‘as long as necessary’ to revive growth.

With the repo rate being as low as 4 percent, the transmission of the rates in terms of interest on home loans and other loans to the consumers has been gradual.

The unchanged repo rate will ensure that home loan interest rates will not harden anytime soon. But the voices from the real estate industry feel that a further reduction in the repo rate would have further boosted demand in the sector which is showing signs of steady recovery.

A reduction in stamp duty charges in some states and varied offers during the festive season coupled with a rate cut would have surely boosted the buyer sentiment further, realty players said.

“It goes without saying that the real estate industry’s perennial hope is fixed on lower interest rates. This would be enabled by reducing the repo rate – at least in theory, given that transmission of reduced repo rates to bank interest rates has been slow at best,” said  Property Consultants.

With real estate demand gradually returning, especially in the wake of developers’ discounts and freebies and reduced stamp duty charges (in Maharashtra), reduced repo rates would have given an added boost to the ongoing festive season, he added.

The country’s economy recovered faster than expected in the July-September quarter. The growth in the economy has also been reflected in the real estate activities of the last quarter where both residential as well as commercial markets have seen a sharp increase in activities.

Industry veteran Niranjan Hiranandani, President – Assocham and NAREDCO, feels RBI needs to have a hawkish stance while looking at the inflation figures and try to taper it further in order to mitigate the supply-side pressure.

“The monetary policy committee’s decision to keep key rates unchanged was on expected lines and may continue in the near future to support growth as private consumption has slowly started and several stalled projects have been revived due to the government’s efforts,” said Hiranandani.

“Home loans will continue to remain at attractive rates, this should augur well for home buying sentiment,” he added.

Shishir Baijal, Chairman & Managing Director, Knight Frank India is of the view that recently reviving market performance indicators, despite all odds and supported by government and central bank interventions, have enthused a great sense of relief across real estate markets in the country.

“Home loan interest rates, which are at the lowest, have played a key role in rekindling the latent demand in the housing market by nudging home buyers to make purchase decisions even during the pandemic. RBI’s decision to keep the rates unchanged will keep the momentum of demand intact to provide the much-needed stability, as even while there is a recovery in the economy, it is still fragile and highly volatile,” Baijal said.

Lincoln Bennet Rodrigues, Founder and Chairman, Bennet & Bernard Group, said that the real estate being a highly cost-sensitive sector, demand will only pick up if the bank rate cut is substantial and results in significant cost savings.

“Going forward, we feel that the interest rate should be reduced with firm liquidity measures as this is the need of the hour, backed by specific fiscal measures to give the much-required stimulus to the sector,” Rodriguez added.

The RBI had earlier announced several measures for the sector, including the rationalization of risk-weight age norms for home loans linking it to LTV and restructuring of loans to developers on a project basis, which, experts believe, will continue to help the housing sector.

“Interest rates on home loans are already at sub-7% level, with banks offering further sweeteners such as processing fee waivers among many others. We hope banks will continue to lend vigorously to the real estate sector, the second-largest employment generating sector in India,” said Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and Proptiger.com.

“The government’s ongoing policy support on rates and taxes for the housing sector indicates that the worst is behind us. The Indian economy had already witnessed a good bounce back in July-September 2020 quarter, and the RBIs move will ensure a complete recovery by the end of next quarter,” she said.

However, the hopes of the industry were high with the upcoming Union Budget.

Ram Raheja, Director, S Raheja Realty said that with the next budget focusing on boosting growth, this may lead to rising investment in safe-haven assets like real estate as prices are likely to appreciate from current levels.

“With the role of the real estate sector in generating employment and economic activity, we foresee 2021 as a year that makes a comeback along with the hopes of a vaccine,”

Diesel price on Friday crossed Rs 73 a litre mark in Delhi and petrol rate neared Rs 83 after 12th increase in the last fortnight. Petrol price was on Friday hiked by 20 paise per litre and diesel by 23 paises in line with the firming international oil rates, according to a price notification from oil marketing companies.

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