RBI disagrees to change the repo rate, real estate developers show disappointment to the decision.

The real estate developers expressed disappointment at the decision of the Reserve Bank of India to maintain the status quo on policy rates in its fifth bi-monthly monetary policy review of the financial year.

The Reserve Bank of India since February has reduced interest rates by cumulatively 135 basis points in five consecutive reductions in 2019, in an effort to boost growth and liquidity in the financial system. With no reduction today, the aggregate decrease of the repo rate remains unchanged at 5.15% for banks to borrow. All six members of the Committee voted against the cut in rates.

“In the past as well, most of the banks, which influenced the development of the real estate sector, has not passed on the benefit of the rate cut by the RBI to the customers. In this case, the RBI will take a holistic approach rather than just glance at the Repo rate revision. It must take an important area into account, such as reforming real estate loans and reintroducing subvention schemes. It must take steps to ease funding in the sector that is so important. In a volatile market, an IPO by a small finance bank that raises Rs 76,000 crore shows no shortage of funds but there is a serious problem of confidence. Rajan Bandelkar, President NAREDCO Maharashtra, said that the RBI and government must work on this topic to reinstate the life into the system and the property market.

According to an RBI report, the GDP growth of Q2 was substantially lower than expected. Different high-frequency indicators suggest that the conditions of domestic and external demand have remained low. Based on previous data, a modest rise in business sentiments in Q4 is suggested in the business expectations index of the Reserve Bank’s industry outlook survey.

“RBI’s decision not to lower the interest rate has come to the industry as a surprise and some disappointment. The lower rate of interest would help to boost credit demand and economic investment, leading to overall economic growth. It would have been an enormous relief to certain ailing industries, such as real estate and automobiles,” said Chairman and Managing director of Knight Frank India, Shishir Baijal.

However, real estate developers and industry experts believe that it is also necessary to lower home loan rates in order to increase demand for housing.

From a real estate viewpoint, Of course, a rate reduction is always welcome, as it adds to the overall sentiment. “The slow trend in housing sales in top property markets has now extended to even smaller cities, with residential sales declining by 2% in 35 metros and smaller cities across the country in the quarter ended September,” said Anuj Puri, Chairman, ANAROCK Property Consultants.

There was also a modest 1% decrease from a year earlier in weighted average prices across these markets. In 14 cities prices have been dropped, while nine cities recorded increase.