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RBI keeps repo rate unchanged, real estate sector disappointed

In five successive reductions so far in 2019, the Reserve Bank of India has cut interest rates by a cumulative 135 basis points since February in an attempt to bolster growth and also liquidity in the financial system. With no reduction today, the cumulative decrease in repo rate stands at which banks borrow from it—remains unchanged at 5.15%.

, ET Bureau|
Dec 05, 2019, 01.23 PM IST
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Agencies
Real estate
Weighted average price across these markets also exhibited a marginal decline of 1% from a year ago. Prices dropped in 14 cities, while nine cities recorded increase.
The real estate developers expressed disappointment over the Reserve Bank of India’s decision to maintain status quo on policy rates in its fifth bi-monthly monetary policy review of the financial year.

In five successive reductions so far in 2019, the Reserve Bank of India has cut interest rates by a cumulative 135 basis points since February in an attempt to bolster growth and also liquidity in the financial system. With no reduction today, the cumulative decrease in repo rate stands at which banks borrow from it—remains unchanged at 5.15%. All six committee members voted against the rate cut.

”In the past also, the advantage of the rate cut by the RBI was not passed onto the customers by a majority of the banks, which impacted the growth of the real estate sector. In the given situation, the RBI should not just look at the Repo rate revision, but instead, take a holistic approach. It must consider an important area like restructuring of realty loans, as well as, reintroducing of subvention schemes. It must take steps to streamline much needed financing into the sector. An IPO of a small finance bank raising Rs 76,000 crore in such a volatile market, is an indication that there is no dearth of finance, but there is a serious issue of confidence. The RBI and the Government should work on this issue to bring back the life into the system and the real estate sector, too,” said Rajan Bandelkar, President, NAREDCO Maharashtra

In a statement RBI said, GDP growth for Q2 turned out to be significantly lower than projected. Various high frequency indicators suggest that domestic and external demand conditions have remained weak. Based on the early results, the business expectations index of the Reserve Bank’s industrial outlook survey indicates a marginal pickup in business sentiments in Q4.

”RBI’s decision to not lower interest rate has come as a surprise and a bit of a disappointment to the industry. Lower interest rate would have helped push up credit demand and investment in the economy, aiding overall economic growth. It would have provided a much-required reprieve to some ailing sectors like real estate and auto,” said Shishir Baijal, Chairman & Managing Director, Knight Frank India.

However, realty developers and industry experts are of view that the same needs to get translated into reduction in home loan rates to fire up the housing demand.

“From a real estate point of view, a rate cuts are obviously always welcome as they help improve overall sentiment. The sluggish momentum in housing sales in top property markets has now spilled over to even smaller cities as residential sales in 35 metro and smaller cities across the country recorded 2% decline in the quarter ended September with 22 of these witnessing a drop in sales,” said Anuj Puri, Chairman – ANAROCK Property Consultants.

Weighted average price across these markets also exhibited a marginal decline of 1% from a year ago. Prices dropped in 14 cities, while nine cities recorded increase. Among tier I cities, Hyderabad is the only city to show a significant increase in price of 5%, showed data from Liases Foras Real Estate Ratings & Research.

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