On expected lines, the RBI decided to maintain the status quo on Repo rates in its monetary policy committee meeting. The central bank also confirmed the revival of economic activities as the covid situation remains under control in large parts of the country. Experts watching and analysing the housing market have welcomed the move.
Anuj Puri, Chairman of ANAROCK Property Consultants says the unchanged repo rate regime works well for home loan borrowers as the floating retail loan rates, which is directly linked to external benchmark repo rates, have been at the lowest level in the last two decades. "The continuation of this low-interest rate regime supports the environment of affordability which has become the new hallmark of the housing market - during the pandemic, and even before," he adds.
Agrees Samantak Das, Chief Economist and Head Research & REIS, JLL. He says the green shoots in the residential sector have emerged in tandem with the gradual improvement in the economic environment as businesses reopen. "Prevailing lower home loan rates supported by RBIs policy rate stance, stable prices and attractive payment plans and schemes of developers are aiding the translation of pent-up demand into sales," he says. If the downward trajectory in COVID-19 cases is sustained, the sector is expected to make a healthy recovery in H2 2021, adds Das.
Shishir Baijal, Chairman & Managing Director, Knight Frank India says: "“We welcome the RBI’s unchanged view on the ‘accommodative’ stance and commitment to maintaining the liquidity in the economy." Baijal says the extended period of historic low interest rates would ensure home loan rates remain at current benign levels and aid the revival of real estate sector. "We have also seen many real estate developers refinancing their borrowings at lower interest cost and benefit from the lower interest rate regime, which is crucial at this juncture when business operations are facing the pandemic pressure," says Baijal.
Vikas Wadhawan, Group CFO, Housing.com, Makaan.com and Proptiger.com confirms that the decision of the RBI MPC augurs well for the real estate industry in general and home buyers in particular since the record low-interest rate regime would enable a large number of buyers to invest in property. "The extraordinary liquidity support the RBI has provided to the economy in the aftermath of the coronavirus pandemic is highly commendable," adds Wadhawan.
Ashok Mohanani, President - NAREDCO Maharashtra says that the banks should pass on the benefits of lower interest rates to the customers which will boost real estate demand. "Although both the Central and the State governments are focusing on reviving the economy with various policy measures, a lot needs to be done to mitigate the adverse impact of the overall pandemic. We at NAREDCO have already urged the State Government to reconsider their decision and reinstate the stamp duty reduction till March 2022 so that home buyers continue to be encouraged and invest in their dream homes," says Mohanani.
Ramani Sastri - Chairman & MD, Sterling Developers says he expected a cut in rates which would have sent positive signals to economic and real estate players. "Not only would the cuts have bolstered greater demand for homes as the interest regime would have been lower, but there would also have been a greater infusion of capital in the market, enabling easier supply-demand transactions," says Sastri. He adds: "While the government has been introducing several initiatives to help the sector, some strategic support in the form of giving input credit on GST and lowered GST on raw materials, etc. will support sustainable long-term growth and benefit the developers as well as homebuyers."
Agrees Rohit Poddar, Managing Director, Poddar Housing and Development. "Although, more efforts are needed to restore the supply-demand balance in the Real estate and infra sectors a continuation of lowest lending rates will ensure that businesses get more window to cope up with the pandemic related challenges."
Cherag Ramakrishnan, Managing Director, CR Realty maintains that the RBI's approach to continue with a 'wait and watch' mode is on "expected lines" to enable the growth momentum that seems to have set in during the last 2 months. "We feel that the demand for homes will now gain momentum going into the upcoming festive season,” says Ramakrishnan.
What's In for Investors?
Sandeep Bagla CEO-TRUST Mutual Fund says the RBI policy is hawkish at the margin. "RBI has acknowledged the strong growth and negative surprise on the inflation front. One of the MPC members has voted for a change in accommodative stance. While there is no real change in the policy, bond market participants will take the nuanced change in language seriously," he says adding that there is a distinct possibility that yields at the longer end, 10 years, will inch up towards 6.50 per cent gradually. "Investors should invest in bond funds with lesser than 3 years maturity to minimise interest rate risk,” he advises.
From the investors point of view, the focus should be towards investing in a high-quality roll down accrual strategies through a bar-bell approach viz. combination of short term and long-term maturity strategies with weighted average portfolio average maturity of 4-5 years, says Nitin Shanbagh, Head - Investment Products, Motilal Oswal Private Wealth. "For yield enhancement, investors can also consider investing up to 25 per cent in well-researched REITs, InVits, select high yield MLDs, etc,” he adds.