Real estate experts have said that the Reserve Bank of India’s decision to leave key interest rates unchanged was expected and would boost consumption.
The central bank’s monetary policy committee on December 4 kept the policy rate unchanged at 4 percent, citing high inflation, but said it would maintain an accommodative stance "as long as necessary". The reverse repo rate was kept steady at 3.35 percent.
The decision to maintain an accommodative stance would ensure adequate liquidity in the system and further stabilise the economy, said Anshuman Magazine, chairman and CEO-CBRE India, South East Asia, Middle East & Africa.
“The strengthening of recovery in rural demand and the momentum gain across urban sector will also support the real estate sector. Additionally, policy support being provided by the government will continue to boost residential uptake and support construction activity in the upcoming months,” Magazine said.
Hit hard by the coronavirus outbreak and lockdown, the real estate sector is seeing demand return aided by discounts offered by developers, reduced repo rate and stamp duty cuts brought in by states like Maharashtra and Karnataka.
“On the positive side, an unchanged repo rate will ensure that home loan interest rates will not harden anytime soon. It is quite clear that increasing interest rates would impact overall demand at a time when the government is keen to boost consumption,” said Anuj Puri, Chairman- ANAROCK Property Consultants said.
Residential real estate showed some recovery with sales increasing by 34 percent in the third quarter of 2020 over the previous quarter.
The RBI’s decision to hold the rate would help homebuyers avail the benefit of the prevailing lowest mortgage rates, Ramesh Nair, CEO & Country Head, JLL, said.
“Green shoots of recovery armed with other incentives such as stamp duty reduction in some states and the flexibility of developers in offering best prices/payment schemes will help in improving home sales,” Nair said. Home loans would continue to remain attractive and it augured well for home buying sentiment, he added.
The central bank was likely to leave rates unchanged in the near future as well to support growth as private consumption was slowly picking up and several stalled projects had been revived due to the government’s efforts, said Niranjan Hiranandani, national president, ASSOCHAM and NAREDCO.
Home loan interest rates, which are at the lowest, have played a key role in rekindling the latent demand in housing market by nudging home buyers to make purchase decisions even during the pandemic.
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The earlier measures announced by the RBI, including the rationalisation of risk-weightage norms for home loans linking it to LTV and restructuring of loans to developers on a project basis, would continue to help the sector, said Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and Proptiger.com.
Manoj Gaur, MD, Gaurs Group and Chairman, Affordable Housing Committee, CREDAI–National, said the demand for real estate assets was already high and with low home loan interest rates, “we see increased sales in the coming quarter. However, we were hopeful that the RBI would take a call on Input Tax Credit, which would have helped the buyers get more benefit”.
Also read: MPC maintains status quo; 6 key highlights of RBI MPC announcements
The affordable housing segment was enjoying an increased demand and the RBI’s growth projections would instil positive sentiment in the market, which would translate into good numbers for the real estate sector too, Signature Global Group founder-chairman, Pradeep Aggarwal said. Aggarwal is also the chairman of ASSOCHAM National Council on Real Estate, Housing and Urban Development.
RBI governor Shaktikanta Das said India’s gross domestic product was seen contracting by 7.5 percent in FY21 amid economic disruptions caused by the novel coronavirus pandemic. The RBI had earlier projected a contraction of 9.5 percent
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