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No band-aid solutions for housing, please

The repo rate cut announced by RBI has evoked mixed responses from among the real estate stalwarts. While appreciating the rate cut, they asked RBI to ensure that the benefit is passed in to the end consumer which is not happening.

Here are some reactions.

Anuj Khetan, Director, Vijay Khetan Group, said RBI has played its part but banks need to do theirs by transmitting the rate cuts to the consumers. “The extension of the moratorium on loans by further 3 months would bring in some relief to the borrowers in this difficult situation. These measures will have a cascading effect on the economy by offsetting some pains of the salary cuts faced by employees as the biggest expense are the EMIs for everyone,” Khetan said.

RBI and the Finance Minister will need to work in tandem to bring in long-term economic measures to push businesses at least in the first gear from neutral rather than giving piece meal solutions which are like temporary band-aids which will hurt even more when it will be ripped; pushing the economy in reverse, he argued.

In the current scenario, liquidity is accessible in abundance to the companies that share an existing relationship with the financial institutions, but banks are turning away new proposals from those companies who were debt free and have not leveraged any services from them in the pre-Covid era but would like to avail some credit now for the expansion of their business, Khetan said.  

Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory, said: “Repo rate at 4% is going to drastically reduce the borrowing cost and contribute to demand generation. Thebanks should immediately pass on the reduction in the repo to ensure the objectives of demand creation and liquidity infusion are achieved.”

Agrawal felt that the extension of moratorium on loans by another 3 months will help institutions and individuals alike in battling the ongoing crisis. The much required liquidity in the market place is also going to get a boost from the measures announced by RBI today. “We would also urge the government to focus on reducing the high transaction cost, the same will go a long way in revival of the real estate sector post the lockdown,” he added.

Anuj Puri, Chairman – ANAROCK Property Consultants, said that the hard facts of declining consumption and a deepening economic slowdown in India are inescapable. All sectors including real estate have been severely impacted. To this gloomy backdrop, the RBI’s repo rate cut of 40 bps – from 4.40% to 4% now - is a welcome move. Simultaneously, for the second time in a month, the reverse repo rate has also been slashed by another 40 bps and now stands at 3.35%, Puri said.

 “This is another big step which will ease liquidity for developers - the rate cut will not only send out positive signals but will enable banks to lend even more. Thus, the rate cuts combined with the further extension of loan moratoriums by 3 months up to August 31, 2020 augurs well for the real estate sector in the times to come,” he said.

 This move is a major booster shot aiming to cushion the impact of COVID-19 on the Indian economy. Beyond doubt, repo rate cuts do uplift the sentiments of home buyers even further. Home loan interest rates have already gone down substantially over the last year, and are presently at an all-time low averaging between 7.15% to 7.8%, Puri said.

 “Interestingly, ANAROCK’s recent survey conducted during the lockdown also highlighted that of the respondents who were previously in no mood to purchase properties and have now become buyers in the lockdown period, a massive 92% cited lower home loan interest rates and a sense of security that physical assets provide during such exigencies,” he pointed out.

Lakshmanan V, Vice President & Head – Sales (Derivatives & Treasury Products), Federal Bank, said “The uncertainty created by Covid and the time period of its stay clearly

brought out in RBIs statement: Negative growth in FY21, without estimates being clearly stated. Likewise a statement on inflation easing in the second half after firming up in H1 points to the same. While accommodative stance and Rate Cuts are welcome and is the need for the hour, the key continues to be transmission, importantly to the desperate sectors of the economy.

Robustness of Fx Reserves at USD 487 billion covers close to 1 year of imports. The Rate cut, while anticipated, had the 10 yields drop to 5.88%, before recovering, currently at 5.96%.

 

 

 


 

 

 

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