After reducing it five consecutive times in 2019, Reserve Bank of India (RBI) finally left the repo and reverse repo rates rate unchanged in its most recent policy review dated December 5, 2019. The real estate fraternity has expressed disappointment over the RBI’s decision. CW records select reactions:

Dr Niranjan Hiranandani, SVP, Assocham, President NAREDCO & Managing Director, Hiranandani Group: “Despite expectations of the rate cut, The RBI stayed away from taking a cue from their global counterparts and decided not to continue with repo rate cut for the sixth time in a row, which was the need of the hour to revive the slowing economy. But the Monetary Policy Committee (MPC) decided to take a pause after five consecutive rate cuts this year. MPC lowered the repo rate by 135 basis points between Feb-Oct, 2019.  The GDP growth target for 2019-20 is also revised downwards from 6.1 percent to 5 percent.

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. India Inc. was expecting a rate cut of 1.0 instead of small tinkering such as a rate cut of 0.25 bps, which would have provided a boost to the Government’s recent initiatives to kick-start GDP growth.  Announcement of One Time Roll Over to restructure bad loans would have been a logical step for the revival across the industries. Thus, the decision to wait and watch the outplay of previous cuts will go against the current sentiments. The markets overall are disappointed.”

Sanjay Dutt, Managing Director & CEO, Tata Realty & Infrastructure: “This time, while the focus of the RBI remains to be on reviving the economy, we are disappointed to see no change in the policy rate which remains at 5.15 per cent. The anticipation was for a more liberal 25 bps rate cut and we hope that the RBI sees room for a generous rate cut in the system in the near future, especially with the GDP growth target for 2019-20 being revised downwards to 5 percent. The real estate industry, in particular, has been facing some difficult times and with inventories piling up the need to push demand and encourage purchase is now more than ever. Enabling people to obtain loans at a lesser interest rate would certainly help in the long run. The transmission of the benefits to homebuyers brought upon by the earlier policy rate cuts also remains to be seen. Although the government is trying to boost the sector with initiatives like the Rs 250 billion fund, the current efforts might not be adequate. The government’s continued support is expected to ease liquidity pressures and in reviving the ailing sector.”

Anuj Puri, Chairman, ANAROCK Property Consultants: “Contrary to overall expectations, the RBI kept the repo rates unchanged to 5.15 per cent while maintaining an accommodative stance. From a real estate point of view, rate cuts are obviously always welcome as they help improve overall sentiment. Also, lag-less transmission of rate cuts to retail borrowers as RBI has mandated banks to directly link interest rates with repo rates. The expected rate cut of 25 bps would have caused home loan values to fall below 8 per cent for first time ever. However, it is also true that another rate cut alone would have been insufficient to stir housing sales significantly across budget categories. The previous rate cuts throughout 2019 had almost no perceptible impact on residential sales. In fact, back in 2014, even when the home loan rates were high in two digits at 10.3 per cent, housing sales remained at peak levels. In the present scenario, only the combined effect of lower interest rates coupled with other measures such as a cut in personal taxes – reportedly being considered by the FM – can actually stimulate residential sales out of their current lethargy.”

Anshuman Magazine, Chairman & CEO-India, South East Asia, Middle East & Africa, CBRE: “RBI’s decision to keep the repo rate unchanged is an indication towards the government’s focus on the evolving inflation-growth dynamics.  However, the central bank maintained an accommodative stance, signaling that room still remains for further monetary action. The introduction of external benchmarks has already resulted in better transmission of previous repo rate cuts and the focus of the central bank currently remains on addressing impediments that are holding back investments and dragging down economic growth.”

Ramesh Nair, CEO & Country Head-India, JLL: The central bank by keeping the rates unchanged has recognised that the need of the hour is to infuse confidence about the economic growth through a holistic approach. This will come by combining fiscal and monetary measures. Amidst the ongoing debate of whether the RBI will bottom out its rate cut cycle or continue to slash policy rates, the sixth bi-monthly monetary policy review of 2019 ended with the central bank keeping the policy rate unchanged at 5.15 per cent. The conjectures over the RBI pulling a pause button over rate cuts turned out to be true as it has maintained its accommodative stance. The decision to maintain policy rates augurs well for the economy as the recently introduced policy reforms will take time to pan out and materialise. The economy needs to absorb the impact of the recently introduced reforms and the previous rate cuts. The real estate sector is expected to pick up due to the favourable policy incentives and the faster transmission of previous rate cuts. Moreover, with the inflation already crossing the 4 percent mark and expected to remain elevated for a few quarters, further rate cuts would have posed an upside risk. In light of the recently announced reforms doled out by the government, the real estate sector is expected to register higher growth in times to come. Measures brought so far are likely to show their impact. Complementing the corporate tax cuts and the creation of an AIF fund for stressed projects, the government should explore the options of increasing the money supply in the economy. That would not only encourage consumer spending but also stimulate investment flows and higher credit flow which has come down over the quarters.”

Shishir Baijal, Chairman & Managing Director, Knight Frank India: “The industry expectation was that slowing economic growth would take precedence in RBI’s policy decision. Hence, 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 much required reprieve to some ailing sectors like real estate and auto. RBI has probably taken the cautious approach of wait and watch to see the effect of past rate cuts and also to assess the inflation trajectory. With economic growth remaining subdued, there are still chances of a rate cut in the next meeting.”