NEW DELHI: The Reserve Bank of India's (RBI) Friday announcement to cut repo rate by 40 basis points (bps) — from 4.40 per cent to 4 per cent and extend moratorium by three months — was widely welcomed by the country's Real Estate players. If the benefit of rate cut is passed to the final consumers by financial institutions, the sector at large feels it can uplift sentiments of home buyers and improve liquidity constraints faced by developers.
"This is another big announcement which will ease liquidity for developers. However, the quick transmission will be key to the huge liquidity infused by RBI," said Surendra Hiranandani, Chairman and Managing Director, House of Hiranandani. He added that the current scenario offers excellent investment opportunities in residential real estate as affordability is at all-time high.
Anuj Puri, Chairman – ANAROCK Property Consultants said that 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 per cent to 7.8 per cent.
"Today’s repo rate cut will further help banks to lower home loan interest rates, which may get several more fence-sitters onto the market. Moreover, the repo rate cut may compel banks to reduce the interest rates for FDs even further - this could result in even more people leaning towards housing as a better investment option," Puri said.
However, real estate players continue to seek their one-time loan restructuring demand, which was not addressed by the Apex bank on Friday.
Satish Magar, President, CREDAI National, said, "We expected more stringent measures from the RBI booster to revive the economy. The move of moratorium extension is a short term piecemeal solution to a long term problem. The interest rate should be reduced with firm liquidity measures as this is the need of the hour backed by one -time restructuring of loans to help the real estate sector from crumbling."
He added, "RBI has tried to ease the pressure on borrowers and has extended group exposure limit for lenders to corporates from 25% to 30 % but this is not enough to solve the ongoing liquidity crisis. The government now needs to ensure that banks are forthcoming and are passing on the benefits to us currently, there is a dearth of income in the sector owing to the COVID crisis."
Shishir Baijal, Chairman and Managing Director, Knight Frank India, said, “It would have been a big respite if the long-standing real estate industry demand for a one-time restructuring of loans was allowed along with the measures announced today. The expected contraction of the GDP is worrisomely emanating from a significant drop in private consumption. While the RBI has taken steps to boost liquidity, one of the real challenges of boosting demand remains, which we hope that subsequent announcements will address.”