Realtors express discontent over rate cut pause

New Delhi, Dec 5 (SocialNews.XYZ) With the Reserve Bank's Monetary Policy Committee (MPC) keeping the repo rate unchanged, real estate developers have expressed their discontent over the status quo, saying that further rate cuts are required for the sector to revive.

Defying market and industry expectations, the RBI's MPC on Thursday kept the repo, or its short-term lending rate, unchanged at 5.15 per cent.

Industry experts however, say that a rate cut was needed at this point of time as the economy is going through a slow growth phase and the consumer sentiment is subdued.

"By maintaining the status quo, the RBI has given some kind of surprise after a long time. Unfortunately, it is contrary to our expectation. The whole industry was assuming a 25 bps (basis points) cut. But it seems the inflationary expectation has outweighed growth projections," said Amit Modi, Director, ABA Corp.

"In the last few months, government has announced certain measures to revive demand particularly for real estate sectors like constitution of realty AIF (alternative investment fund), lowering GST on affordable housing, among others. It remains to be seen what additional measures it takes to revive the economy," he added.

Sharan Bansal, Joint Secretary, CREDAI Ghaziabad said that the real estate sector is "disheartened" by the status quo maintained by RBI.

He observed that the real estate being an interest sensitive sector would have benefited from any cut in policy rates, provided it is passed down to the consumer.

"But, to our surprise, RBI has maintained status quo mainly to check rising CPI (retail)inflation. The monetary stance will adversely impact chances of revival of the demand in the immediate period and a lot would depend on government action going forward," he said.

Citing the slowdown in the economy and the consequent impact on real estate, Sakshee Katiyal, CEO of Home and Soul, said that the RBI should have gone ahead with another rate cut.

"The downturn has hit real-estate industry the maximum, the buyers are hard to find for the developers. The economic activity in the real-estate has been the lowest in the last quarter, inventory has hardly moved. RBI needs to supplement the government initiatives to boost the sector. Consumers are expecting cheaper home loans which will help boost the sector," she said.

Niranjan Hiranandani, President, National Real Estate Development Council (NAREDCO) said: "The decision to wait and watch the outplay of previous cuts will go against the current sentiments. The markets overall are disappointed. The benefit from the previous rate cuts are yet to play out completely and the real estate industry is still reeling under the liquidity crisis"

Market players, however, expect that the banks would now transmit the cummulative 135 basis points announced by the RBI after the previous five MPC meets. The transmission of the rate cut to retail loans has been slow and only 44 bps has been transmitted so far, RBI Governor Shaktikanta Das said on Thursday.

Ashok Mohanani, Chairman of EKTA World and Vice President, NAREDCO Maharashtra said: "Keeping in mind the 135 bps change given over the year and with the revival of the industry we are still looking at a room for positive transmission for the industry."

Amit Jain, CMD of Mumbai-based real estate firm Arkade, said that even with the unchanged repo rate, the sector now has the support of liquidity and the government initiatives to revive the demand from home buyers.

"However, the wheels of change will only churn some results when the benefits of this revision are passed on to the consumer by the banks and inflation is kept under check. We hope this decision will be assertive and reflect from the first quarter of 2020," Jain said.

Source: IANS