Hope to see more such ‘positive moves’ from the RBI: Dr. Niranjan Hiranandani, President, NAREDCO
The first Monetary Policy Committee (MPC) meeting under RBI Governor Shaktikanta Das, and an ideal ‘positive’ to mark the same – a rate cut by 25 bps; change in stance to ‘neutral’. The repo rate now will be 6.25 percent, while the reverse repo rate stands reduced to 6 percent. This is the perfect follow-up to the Budget Speech by Finance Minister Piyush Goyal, and this will not just enhance liquidity in the economy but also boost investment and give the economy a positive growth phase. The option for further rate cuts in forthcoming reviews remains an option, and I hope we will see more such ‘positive moves’ from the RBI. From a real estate perspective, this will impact home loan interest rates, and reduced EMIs are among the best harbingers of positive sentiment, leading up to further off-take of real estate across India.
Real Estate Welcomes the Overdue Repo Rate Cut: Anuj Puri, Anarock Property Consultants
RBI’s decision to slash the repo rate by 25 basis point to 6.25 % is a welcome and unexpectedly positive move, given the sops that the recent expansionary budget gave to farmers at an additional cost of Rs 75,000 crore per annum. It was also overdue, as this has been the first cut in a long time. It definitely augurs well for the real estate sector which also received a budget bonanza in the previous week.
Rate cuts give a substantial push to property buyer sentiments, and it was certainly high time for such a cut. Home loan interest rates increased by as much as 5-7% in the last one year because the RBI hiked its repo rates by 50 basis points over the same period. In other words, home loans had become a more expensive proposition.
However, the real estate market does not depend only on marginally improved buyer sentiment – there are larger issues that hold the sector hostage right now. The liquidity issues post the NBFC crisis are a bigger concern. NBFCs and HFCs have seriously curtailed disbursements to developers. Moreover, the repayment capabilities of many developers are also in question.
Furthermore, though the account deficit (CAD) widened to 2.9% in December, inflation targets are more or less within control and the GDP is estimated to grow at a very healthy 7.5 % in the new fiscal. Going by these indicators, the Indian economy is looking at a good financial year ahead – always assuming that a stable government is voted to power in the upcoming general elections.
Room for further rate cut: Abheek Barua, HDFC Bank
RBI following its own rule – both recent history and forward guidance made a compelling case for the rate cut. Going by the guidance, room for further rate cut is there. Growth back in the RBI’s vocabulary, not as a risk to price stability but as a legitimate target. Fiscal concerns and the inflationary consequences seems to be underplayed.
Repo Rate Cut a Welcome Step; Set to Boost Realty Sector: Ramesh Nair, JLL India
RBI’s decision to reduce repo rate by 25 bps has mainly come on the back of declining headline inflation below 4% and stable macro-economic indicators. This coupled with sanity in crude oil prices and a less volatile rupee has provided the much needed elbow room for RBI to provide stimulus to the economy by reducing repo rates. The Monetary Policy Committee’s stance is quite positive from the perspective of providing the necessary growth stimulus and reviving investments.
2019 has started on a positive note for Indian real estate with a welcome budget that has given a slew of incentives for home buyers and developers with adequate focus on affordable housing. The timing of the reduction in policy rate could not have been better. Not only will this improve the overall sentiment, but will also boost the housing market that is already showing signs of recovery. With residential sales and new launches on an upward trend in 2018, genuine home buyers are now actively considering a serious buying decision. Overall, this is going to have a positive impact on the housing market and we expect sales and launches to gain further momentum on the back of improved economic scenario.
A step in the right direction: Shishir Baijal, Knight Frank
The reduction in REPO and Reverse REPO rates by the RBI by 25 BPS is a welcome move, which we hope will provide a further fillip to the demand side for real estate. As a result of this reduction, we hope that banks will pass on the benefits of the revised rates to the end consumer of loans, thereby making it easier for them to make their purchase decision. For a sector which has been suffering from poor end user demand for some time now, this is a step in the right direction.
A welcome move and in line with industry expectations: Khushru Jijina, Piramal Capital and Housing Finance
The 25 bps cut in policy rates is a welcome move and in line with industry expectations as well as with central banks in advanced economies. Resulting lower cost of funds would help the NBFC sector to recover faster and its positive effects would trickle down to the larger sections of the economy namely real estate and MSMEs. NBFCs would also benefit from RBI’s decision to link bank risk weights on NBFC exposures to the rating of such instruments. This would improve flow of bank credit to the better managed NBFCs, helping segregate the men from boys. This alongwith the harmonization of Asset Finance Companies (AFC), Loan Companies, and Investment Companies, into a single category would fastrack the process of consolidation in this space, as we have been expecting for some time.
Additionally, we also welcome the relaxation in FPI limits investing in corporate bonds and feel that this is the right step towards deepen the Indian debt markets.
We expect one more rate cut in the April policy: Murthy Nagarajan, Tata Mutual Fund
RBI in its monetary policy, cut the repo and reverse repo rates by 25 basis points. The repo rates now stands at 6.25 % and reverse repo rates at 6 %. The reason for reducing the repo rates is due CPI inflation being revised downwards by 60 basis points. Consumer Price inflation for the current quarter is expected to be 2.8 %, the first half of the next financial year is expected to be 3.2 -3.4 % and the third quarter of next financial year is expected to be 3.9 %. As per RBI, CPI inflation going forward is expected to be lower due to excess supply conditions prevailing for several food Items, lower crude prices, Lower electricity prices. RBI survey of household and producer inflation is reflecting significant moderation in inflation expectations. They also expect the inflation pick up, in health and education, to be a one off phenomenon. The Monetary Policy Committee noted the output gap has opened up moderately as actual output has inched lower than potential. This necessitate the need to strengthen private investment activity and increase private consumption. The GDP growth for the next financial year is projected at 7.4 with risk evenly balanced.
The focus of the union budget is tilted towards consumption which increases the chance of CPI inflation to go up. Given that the combined borrowing of central, state and PSU is around 8 % of GDP, we don’t expect Repo rates cuts to be shallow. We expect one more rate cut in the April policy, as CPI inflation near term should be lower due to lower food and crude prices. This should bring the real rates which is the difference between RBI forecast of CPI inflation (3.9%) and repo rates (6%) to around 200 basis points. Going forward, we expect the short and medium term rates to come down by 25 to 35 basis points and the long end rates to be range bound due to supply pressures. The new ten year is expected to be in the range of 7.20 – 7.50 % in the coming months. The corporate bonds spread is expected to widen due to risk aversion and continuous supply of papers.
Opportunity for more rate cut action in the year 2019: Amar Ambani, YES Securities
With an extremely benign inflation reading and limited risks to upside and with the INR having stabilized, it was it was clear to us that the time is right to provide the much-needed support to economic growth. This could also be gauged from the RBI policy announcement, where members unanimously voted in favour of changing their policy stance to Neutral from that of Calibrated Tightening. To our mind, it was only a matter of whether rates were cut in today’s meeting or the during the next policy meet of RBI. In our recent strategy note post Union Budget, we opined that while the Central Bank will take cognizance of the budgeted pause in the fiscal deficit glide, it will not hold back from cutting the Repo rate. The RBI chose to cut Repo by 25 basis points in today’s policy itself, with four members (including the Governor) favouring a rate cut while two members opted for status quo on rates. We welcome this decision and believe that the present situation opens up doors for more rate cut action in the year 2019.
Space for further monetary easing: Lakshmi Iyer, Kotak Mahindra Asset Management Company
The repo rate cut which was a toss of a coin probability has finally fructified with a 4:2 vote. The inflation forecasts have also been revised lower as also the growth forecast. If inflation trajectory continues to remain benign, it could create space for further monetary easing. Liquidity in the banking system also may not be compromised, though the tools for liquidity management remain open. To that extent, markets may remain unclear with respect to quantum of OMOs going forward. Overall, we believe that the curve is likely to steepen and short to medium term spread assets are likely to do well.
Inline with our expectations: Parth Mehta, Paradigm Realty
This cut by 25bps to 6.25% is inline with our expectations as there is a serious liquidity crunch faced by the banks and NBFC resulting in Dampening of overall business environment. Since the inflation is in check cut is a logical move by RBI to induce required liquidity.
Will lead to an increase in sales: Rajan Bandelkar, President, NAREDCO West
The 0.25 basis points rate cut is a welcome stance and will lead to an increase in sales as there will be a dip in the interest rates on home loans, thus enabling buyers to make realty purchases, in both residential and commercial space. The government is taking effective moves to stabilize and further enhance the real estate sector of India and this rate cut is another boost towards the reinvigoration of the industry.
Rate cut will positively impact the economy: Surendra Hiranandani, House of Hiranandani
The repo rate cut today and the “neutral” stance adopted by the Central Bank is a welcome move and will positively impact the economy ahead of the elections. Higher Interest rates have prevailed for a longer period than necessary even as Inflation as per the WPI index remained muted. It held back growth and halted investments in capital intensive sectors of the economy, particularly in infrastructure. A rate reduction will act as a catalyst and provide the much needed impetus to build upon the various initiatives announced in the Union Budget. The overall direction of the monetary policy is oriented towards growth and the change in stance provides the Cental Bank much needed flexibility to meet growth challenges in the future. This augurs well for the real estate sector and could lead to fence sitters coming back to the market. It is now up to the banks to reduce lending rates and ensure that the common man reaps the benefit of this move.
Reduction in the repo rate was expected: Rohit Poddar, Poddar Housing and Development Ltd.
The reduction in the repo rate was expected given lower inflation numbers and to stimulate growth in an election year. The cut down of repo rate has changed the current calibrated tightening to a neutral stance.
We expect core inflation pressures to remain persistent: Shubhada Rao, YES Bank
The Reserve Bank of India’s (RBI) action went beyond our anticipated change of stance to neutral, as it delivered a 25 bps cut in repo rate. With FYTD19 average CPI inflation at 3.8% and having remained below 4.0% target for 5 consecutive months, the RBI appears to have drawn comfort not only from the benign current inflation levels, but also the forward-looking inflation trajectory and the sharp 130 bps decline in 1Y ahead household inflation expectations. The comfort on inflation also opened up the space to support growth.
Looking ahead at 2019, we expect core inflation pressures to remain persistent, amidst a fiscal led demand push. However, momentum in food and fuel prices will be key, given their strong influence on headline CPI inflation. We expect FY20 CPI inflation outturn to be somewhat higher than RBI’s estimate, so the bar for future rate cuts will be high, lest there is a dramatic downside either owing to a correction in global crude prices from current levels and/or a persistence of soft food price momentum in FY20. Hence, we retain our call of a prolonged pause with a neutral stance for now.
Rate cut will act as a catalyst in reviving real estate sector: Amit B. Wadhwani, Sai Estate Consultants Pvt Ltd
The sentiment for the real estate industry has seen a upward ‘interest’ surge post the Interim budget proposals favouring the home buyers as well as the developers. The cut in repo rate in today’s policy announcement will act as a catalyst in reviving the real estate sector which was crippled with the financial crunch in the system. The banking regulator’s plans of injecting durable liquidity will push money in the banking system, ensuring rise in loans at better rates for the homebuyers as well as developers. This will play a large role in bringing an equilibrium in the demand and supply economics of the Indian real estate industry. The recently proposed income tax structure and rebate schemes will increase the disposable incomes and hence incremental savings by the middle income group which will bring in the sales velocity by them buying more home assets.
We expected the central bank to reduce the repo rate: Umesh Revankar, Shriram Transport Finance
A relief on the cost of funds is awaited eagerly by the SMEs as it helps them with reduced borrowing cost and offers much needed impetus, thereby improving their financial health.
RBI’s current rate cut is indicating that in the next fiscal, if the inflation remains below 3% and oil prices remain stable, we expect rates to further reduce by ~25 bps.
Investment demand and the credit environment of the economy will pick up: George Alexander Muthoot, Muthoot Finance Limited
The 25 bps cut is in line with our expectation which will aid the RBI to boost the liquidity in the system. The overall investment demand and the credit environment of the economy will pick up. We expect further rate cuts to come our way if the inflationary pressures are well under control.
Another step towards making ‘Housing For All’ a success: Ashok Mohanani, EKTA World and Vice President, NAREDCO West
The rate-cut and monetary announcement by the RBI is certainly a welcome move as it will lead to higher availability of funds and aid the sector with increased liquidity. The sentiment which was boosted by the recently proposed budgetary reforms, will see a further improvement and convert fence-sitters into purchasers. Investment demand too will see an impetus. Reduction in home loans interest rate will definitely increase sales. This is another step towards making ‘Housing For All’ a success. We look forward to seeing a sharp rise in sales and a significant drop in unsold inventory by the end of 2019.
The MPC delivered a dovish policy: B Prasanna, ICICI Bank
The Monetary Policy Committee (MPC) delivered a dovish policy, both in rate action and in stance, while sounding sanguine on low inflation expectations. The sharp lowering of inflation forecasts could enable further policy easing in April. In a significant departure from previous commentaries, there was an emphasis on the need to support growth if inflation objectives are achieved and the MPC noted that the slack in the economy is rising.
The RBI has also introduced some welcome regulatory changes. The list includes withdrawal of concentration limits in corporate bonds that will promote participation of Foreign Portfolio Investors, rationalization of interest rate derivatives guidelines which will boost depth and liquidity of derivative markets, and the task force on offshore rupee markets that will foster greater participation in Indian assets. The change in risk-weighting of rated exposure to NBFCs, will help strong NBFCs to get credit thereby easing some of the strain being felt currently.
Central bank has moved away from its stance of calibrated tightening: Chintan Sheth, Ashwin Sheth Group
The revised lending rate of 6.25% shows that the central bank has moved away from its stance of calibrated tightening. This will bode well with the proposals announced in the interim budget last week. However, we expect the banks to pass on the benefits of the rate cut to end users with respect to home loans to reduce the financial strain on homebuyers.
Rate cut is expected to infuse liquidity in the system: Hari Prakash Pandey, Runwal Group
The RBI’s move on slashing the repo rate by 25 basis points focuses on driving growth and is expected to infuse liquidity in the system. This will be a much-needed relief for the real estate sector as it will lead to lower interest rates for homebuyers. RBI’s decision will not only increase positive sentiments in the real estate sector but will also boost the residential demand going forward.
Rate cut will provide respite to the real estate sector: Shailesh Puranik, Puranik Builders Limited
The change of stance to ‘neutral’ from ‘calibrated tightening’ is expected to boost the economy and provide respite to the real estate sector. Home loans are expected to get cheaper if banks pass on the benefit of this rate cut to end users which is expected to be particularly beneficial for first time homebuyers. Overall, this rate cut is expected to complement the initiatives taken by the central government in the interim budget 2019-20.
A much-needed impetus in the real estate sector: Manoj Paliwal, Omkar Realtors
Apex bank’s move to soften the interest rates by 25 basis points is a good move, a much-needed impetus in the real estate sector. The move will ensure softening of lending rates and EMI’s will see some reduction whereby attracting more buyers to own the house. Secondly, the RBI’s decision to cut rates at regular intervals will improve the affordability quotient of Indian home buyers.
Repo rate cuts can provide a substantial push to the economy: Tushad Dubash, Director, Duville Estates
Repo rate cuts can provide a substantial push to the economy, including real estate and allied sectors. The central bank’s move to cut repo rate, after months of maintaining its stance on calibrated tightening and focusing on controlling inflation, should incentivize banks to pass on the benefits to end users. If this happens, home loans will get cheaper, which will help a large mass of homebuyers. Fence sitting homebuyers should not wait any further and now look at investing in homes of their choice.
Will lead to rise in housing sales: Samyak Jain, Siddha Group
RBI’s repo rate cut is expected to provide the desired impetus to the residential segment of the realty sector. We look forward to banks in providing relief to consumers seeking homes of their choice by reducing the interest on home loans. This will lead to rise in housing sales and help in achieving the recently announced union budget’s objective of encouraging housing demand.