Quote - Vineet Relia, Managing Director, SARE Homes - RBI Monetary Policy
Mr. Vineet Relia, Managing Director, SARE Homes
“RBI’s decision to keep the repo rate unchanged at 6.25% is disappointing, though not unexpected. The fact that credit growth has slipped to multi-year lows, despite lending rates falling by nearly 150 basis points since early 2015, is proof that other factors are at play. Demonetisation has accelerated the transmission of rate cuts over the past two months. While it has benefited select borrowers, it has squeezed incomes for most savers, with deposit rates plummeting over two percentage points over the past two years. A cut in policy rate may do more harm than good if inflation creeps up with the rise in global commodity prices. India needs positive interest rates to induce savings and push up investments. Nonetheless, since demand in real estate and allied industries remains sluggish, a rate cut could have improved liquidity and created renewed interest in property purchase.”
Comment by Mr. Anshuman Magazine, Chairman, India and South East Asia
Sixth Bi-monthly RBI Policy Review for the year 2016-17, quote by Mr. Anshuman Magazine, Chairman CBRE India & South East Asia.
Mr. Anshuman Magazine, Chairman, India and South East Asia, CBRE says, “The decision to keep the repo rate unchanged comes as a surprise. While the recent demonetization drive has brought in the necessary liquidity into the banks, lowering the repo-rate would have helped ease borrowing costs. This would have provided an added thrust to the government’s initiatives for affordable housing and fueled demand. A low inflation rate amidst slowdown in projected economic growth provided a conducive environment to reduce rates.”
RBI monetary policy review- Reaction from Mr Dev Arora, CEO, 8minutes Future Energy
As the RBI has kept its repo rate unchanged at 6.25 per cent, please find below the reaction of Mr Dev Arora, Founder & CEO, 8minutes Future Energy Pvt Ltd:-
“India is currently lagging behind its targets as far as solar rooftop is concerned. As against a target of 40 GW of solar rooftop by 2022, we have just about managed to achieve 1,000 MW as of now. In this scenario, the industry needs all possible support from the Government to fast track deployment of solar systems. In this context, the decision of RBI to not reduce the repo rate is slightly disappointing. A rate cut would have spurred the real estate industry, which in turn, would have created greater demand and opportunities for solar rooftop systems in the country.”
About 8 Minutes:
8Minutes is a clean energy company founded in 2015 to accelerate India’s transition to clean energy by making Solar accessible & affordable for homes and businesses around the country. In under a year, 8Minutes has achieved the distinction of becoming one of the fastest growing Solar companies in India, and it has the largest community of solar partners, advocates and investors, who all promote clean energy. The company is one of the fastest growing EPC companies in the solar rooftop sector in India. It provides full service deployment of solar systems for homes, businesses and governments providing design, engineering, financing, procurement, installation and maintenance. The company is operational in more than 13 states in India in the commercial and residential solar rooftop segment. It is on track to complete 50 MW solar rooftop installation across the country in 2017, which could power 10,000 homes. 8minutes is playing an instrumental role in making solar power affordable, accessible and reliable in India.
RBI FAILS TO MEET MARKET EXPECTATIONS
With the Union Budget 2017-18 recently announced, markets were anticipating the RBI to come out with a decision to further ease the pressure off the market. With the banks currently holding high liquidity, a rate cut today could have assisted the borrowers in a big way. RBI’s neutral stance today, becomes its second in a row after the previous bi-monthly policy review in December last year. Markets were hopeful that the apex bank will reduce the key rate this time to allow the economy to breathe easy, but has failed to meet the expectations yet again. This being the first bi-monthly policy review for the current calendar year and post the budget; and the sixth and final for this financial year, a rate cut at this point of time would have pushed the banks to further drop their lending rates in near future. This further drop in the lending rates could have motivated the borrowers to gain access to funds at even more lowered rates, thereby signalling a growth in the demand and reduction in EMIs.
With today’s decision in the monetary policy review, the Repo rate remains unchanged at 6.25 percent, Reverse Repo rate under the LAF at 5.75 percent, Statutory Liquidity Ratio (SLR) changed to 20.5 percent from previous 20.75 percent, Cash Reserve Ratio (CRR) at 4 percent and Marginal Standing Facility (MSF) at 6.75 percent respectively. After a series of rate cuts for the general and affordable housing markets recently, this move could have only benefitted further. Realty experts aren’t welcoming this move as the economy was gaining momentum especially after demonetisation, and they believe that the growth graph will carry on to look a bit stagnant until rates are reduced further.
Industry Reacts:
Deepak Kapoor, President CREDAI-Western U.P. & Director, Gulshan Homz
Looking at the current market scenario, we were anticipating a repo rate cut by at least 25 basis points as the banks were already holding high liquidity and the benefit could have been passed onto the buyers. Lowered interest rates just ahead of the financial year closing could have allowed the buyers to plan their future investments, and realty sector would have benefitted the most especially after the recent lending rate deductions by the banks. RBI has played a wait and watch approach and might be waiting for the remonetisation drive to conclude properly and should cut the rates in April.
Kushagr Ansal, Director, Ansal Housing
We had pretty much entered a rate reduction cycle which was bringing back the demand for property investments in the market. After such a populous budget, a rate cut should have been there but the RBI has gone against the market forecasts. A rate reduction today could have allowed the realty buyers to plan property purchase as EMIs could have further eased. Banks are still to pass on the benefits of the previous repo rate cuts and a deduction today could have escalated the matter further.
Vikas Bhasin, MD, Saya Group
The government borrowings had reduced to INR 3.48 lakh crore from 4.25 lakh crore as presented in the Budget, which meant that a rate reduction was quite evident. Earlier this year, the government had provided subsidy on interest rates for affordable housing segment and banks had also reduced the general home loan interest rates by upto 50-60 basis points. A rate cut today could have allowed the potential buyers to invest in property as the EMIs would have reduced further in coming months. We hope that the next bi-monthly policy review observes a rate cut as it has been a neutral review for the second straight time.
Dhiraj Jain, Director, Mahagun Group
In case of a low interest rate environment surrounding the economy and cash available in abundance, the risk of inflation moving up exists. Hence, the RBI doesn’t reduce the rates until it has been fully convinced about the inflation control; as even the inflation has been on a rise for the fifth straight month in December. On the other hand though, since demonetisation, banks are keeping a strong credit and a rate cut today would have allowed them to pass on the benefits to the borrowers where reduced EMIs could have made the demand to take an upward movement on the demand graph for the property market.
Rajesh Goyal, Vice President CREDAI-Western U.P. & MD, RG Group
This is a surprise move by the RBI as we were expecting a 25-50 basis point reduction of the repo rate. The market has been gaining stability and post the union budget, further ease was looking on the cards. Even though the RBI has not provided any rate cut this time, fresh home loan borrowers should not worry much as they may still witness lowered EMIs because amidst intensifying competition among the lenders, the banks might be forced to start cutting down the interest rates themselves.