After RERA, RBI to Boost Real Estate Sector

Bengaluru, April 07, 2016: In a much anticipated move, the apex bank cut down on the already existing REPO Rate of 6.75% by 25 basis points to 6.50%. However, there was an additional surprise sprung in the form of increased Reverse REPO of 6%. Earlier the Policy Rate Corridor stood at +/- 100 bps but now has been reduced to +/- 50 bps as a result of decreased Marginal Standing Facility rate by 75 bps. So, as of now, the key rates stand as REPO rate at 6.5%, Reverse REPO at 6.0%, CRR at 4.0% and SLR at 21.5%. This clearly shows that the RBI has provided further cushion to the banks in order to decrease their lending rates which could not be achieved on notable terms in the previous financial year even after multiple rate cuts.

Industry Reacts

Deepak Kapoor, President CREDAI-Western U.P. & Director, Gulshan Homz

The move to cut down on the basis points is deemed to be very well received in the real estate sector. Last year as well, there were substantial rate reductions but the benefits were not passed on to the end users in full capacity. But, with more rate cut announced in the first policy review of the financial year shows that the market is improving and finally the financial institutions can now finally start to pass on the benefits to the end users.

Sudeep Agrawal, MD, Shri Group

RERA was already doing rounds in the real estate sector and now again with the Reserve Bank cutting down on the repo rates will only make the situation better than before. Cutting down on the repo rates is sure allow banks more margin towards cutting down on the lending rates, hence increasing the purchasing power of the common man. The Union Budget had key features for affordable housing and this policy review is sure to add more feathers to the affordable housing segment.

Vikas Bhasin, MD, Saya Group

RBI has not only cut down on the REPO rates but also increased the Reverse REPO rates which mean a win win situation for the banks. Increased Reverse REPO will allow banks to keep their money with the Reserve Bank at higher rates than before. One must not forget that the Policy Rate Corridor has been reduced from 100 bps to 50 bps which will now mean that the key rates will differ by 0.5% at all times. The basic benefit being, banks will borrow from RBI at a lower rate courtesy the decreased REPO rate and will lend to RBI at a higher rate thus increasing their profits on a twofold basis. This will help lower the prevalent lending rates in the market.

Ashok Gupta, CMD, Ajnara India Ltd.

The RBI has given positive signs wherein the CPI inflation is assumed to come down to 5% and the GDP is expected to rise to 7.6% by the end of the current fiscal year. These show that the market is on an improvement spree, however, against common speculation of 50 bps, the key rate was reduced by only 25 bps citing reasons of heightened global financial volatility which is a controlled measure making sure that the domestic market does not suffer. With so many infrastructure developments lined up, one cannot take the risk of fluctuating domestic market.

Rupesh Gupta, Director, JM Housing

With the REPO rates being cut and Reverse REPO being increased, banks would be forced to cut on the lending rates. Reduced lending rates are destined to bring in positive sentiments in the market which will induce increased investments in the real estate sectors. Additional sectors and industries are also to benefit which will add to the benefits being directly received because the realty sector is in itself an end user for over 30 allied industries.

Rakesh Yadav, Chairman, Antriksh India

The projections are bright for the upcoming months and with this reduction, people are sure to be entrusted more towards investing in the market. There might not be direct benefits visible at the very moment but definitely investments are sure to increase fund flow in the market which in some way will pump more funds in the real estate sector as well. This will ensure better sentiments and if the banks decide on further cutting on the lending rates, things will only get better for the sector.

Corporate Comm India (CCI Newswire)