RBI targets to maintain consumer price index inflation at 4 per cent
MUMBAI, June 4 (The CONNECT) – The Reserve Bank’s Monetary Policy Committee (MPC) today decided to keep the policy repo rate under the liquidity adjustment facility (LAF) unchanged at 4.0 per cent.
Consequently, the reverse repo rate under the LAF remains unchanged at 3.35 per cent and the marginal standing facility (MSF) rate and the Bank Rate at 4.25 per cent.
The MPC also decided to continue with the accommodative stance as long as necessary to revive and sustain growth on a durable basis and continue to mitigate the impact of COVID-19 on the economy, while ensuring that inflation remains within the target going forward.
These decisions are in consonance with the objective of achieving the medium-term target for consumer price index (CPI) inflation of 4 per cent within a band of +/- 2 per cent, while supporting growth, RBI said.
Pankaj Sharma, Chief Executive Officer (CEO), Religare Finvest Ltd said the RBI has adopted a wait and watch strategy by adopting status quo on policy rates and this is on expected lines. At the same time, it has reiterated that growth remains a priority while the need for policy action from all sides to support business sentiment revival, including fiscal measures is warranted.
It is now clear that RBI may be waiting for the second wave to abate and it is then expected to take action by further reducing policy rates to revive growth on a sustainable basis. At the same time, the central bank continues to assuage the markets by launching a host of measures to support growth and ensure adequate liquidity in the banking system, Sharma said.
Further, RBI’s move to enhance the overall exposure from INR 25 crores to INR 50 crores under Resolution Framework 2.0 is expected to help more MSMEs, non-MSMEs and individuals who have taken loans but have been impacted by the pandemic. This will help bring down systemic risks in the banking system, Sharma said.
Here are some comments from the real estate industry on the RBI monetary policy:
Anuj Puri, Chairman – ANAROCK Property Consultants felt that had it not been for the pandemic the RBI would have definitely taken a different stance for the benchmark rates today. Considering the rate at which inflation is rising presently in the country, the RBI would have sought to increase the key rates. However, since the economy is still under pressure due to the pandemic and inflation is rising due to supply-side issues coupled with overall consumption sluggishness, it has maintained the status quo on benchmark rates, Puri said.
This is the sixth time in a row that RBI has kept the benchmark rates unchanged, in clear response to the exigencies of the COVID-19 pandemic uncertainties.
Puri opined that It is certainly positive for home loan borrowers as the floating retail loan rates (which are directly linked to external benchmark repo rates) has been at the lowest level of the last two decades. The continuation of this low interest rate regime works very well for all borrowers as the environment of high affordability is likely to continue for some more time, he said.
Shraddha Kedia-Agarwal, Director - Transcon Developers, said the decision was on expected lines. The low interest rates for the last few months has already given a boost to the real estate sector upticking the demand in the last few quarters and enhancing the confidence of the homebuyers.
Shraddha said the RBI move will help to sustain liquidity for some period as we are already witnessing the derailment of economic momentum due to the second wave of Covid-19 pandemic and lockdowns in different regions. It will also help in sustaining economic stability as well as keep the real estate sector stay afloat during these unprecedented times, she said.
Himanshu Jain, VP - Sales, Marketing and CRM, Satellite Developers Pvt. Ltd. (SDPL), said "We anticipated the monetary policy committee (MPC) to keep the repo rate unchanged and retain the accommodative stance that will still continue to serve the markets well. Some strong liquidity measures were announced in the past quarters and are expected to continue.”
“The earlier announcements by the State Government of stamp duty reduction has surely given a boost to the ailing sector and created demand among the homebuyers and we hope such announcements are made in the future as well as the pandemic situation worsens," Jain said.
Maintaining an accommodative stance will infuse liquidity in the economy while keeping inflation within its target, according to Nishant Deshmukh, Founder & Managing Director -Sugee Group.
The interest rates will continue to be at a record low; however, the banks should pass on the benefits to the homebuyers, which will boost real estate demand. There has been a slowdown in the real estate market due to COVID -19 pandemic, and we expect the sector to bounce back soon, Deshmukh said and urged the Government to reconsider its decision on the stamp duty waiver in the interest of the homebuyers and encourage them to invest in real estate. “Also, the industry status for the real estate sector has been long-standing demand, and we anticipate the concern to be addressed soon. We feel that the Government should keep a continuous check on the reforms that will give a fillip to the real estate sector and indirectly help revive the economy,’’ he said.
Bhushan Nemlekar, Director - Sumit Woods Limited, said The RBI's decision to maintain its accommodative stance was on the expected lines in light of the second wave of the pandemic causing the economic recovery to stumble. The prevailing low home loan rates are already enticing for homebuyers. It's high time the banks passed on the further benefits to the homebuyers, he said.
Anuj Khetan, Director- Vijay Khetan Group, said "Due to the second wave of COVID-19 and the lockdown restrictions imposed in various States, the monetary policy committee’s decision to keep key rates unchanged at 4% was on expected lines. This move is a much-appreciated step recognizing the role of the real estate sector in generating employment and economic activity.”
“With the interest rates at a record low, the Government will continue taking affirmative measures as long as it is necessary to revive the economy and mitigate the impact of the second wave of the pandemic," he said.
Kaushal Agarwal, Chairman, The Guardians Real Estate Advisory, said the RBI approach towards tackling the situation created by the pandemic and steps taken to help revive the economy will go down in history as being one of the finest. Keeping in mind the disastrous COVID-19 second wave, Agarwal said, a slight reduction in the key rates would have been widely celebrated.
The reduction would have helped spur growth in demand for real estate assets, which has been severely hit as a result of the pandemic and subsequent lockdowns. Apart from the reduction in stamp duty charges in some parts of the country, the all-time low housing loan rates have given the much-required fillip to sales activity in the last couple of quarters, he said.
With the withdrawal of the temporary reduction in transaction costs, in states like Maharashtra, the expectation amongst stakeholders of the industry is that the banks should now further sweeten the lending rates, at least till such time that the economy gets back to the pre-COVID levels, Agarwal said.
Pritam Chivukula, Co-Founder & Director - Tridhaatu Realty, and Honorary Secretary, CREDAI MCHI thanked the RBI for continuing with their accommodative stance. The second wave of the pandemic and intermittent lockdowns across major cities has led to economic uncertainties across the country. There is also uncertainty around the vaccination and the increasing input costs is having a catastrophic impact on the survival of few businesses. Therefore, he urged the Central Government to address the deteriorating health of MSMEs and various other sectors which have been severely impacted by the second wave of the pandemic.
The low interest rates have been a crucial factor in the revival of the demand in the real estate sector. Looking at the record transactions in the previous quarters where the homebuyers took advantage of the stamp duty benefit before the March deadline, we urge the State Government too to reconsider their decision on the stamp duty waiver in interest of the homebuyers again, Pritam said.