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Here are some reactions of realtors on RBI's policy outcome on realty sector

IANS | June 08, 2022 04:27 PM

NEW DELHI: The Reserve Bank of India on Wednesday raised the key lending rate or repo rate by 50 basis points to 4.9 per cent to tame rising inflation, which has been now above the central bank's 6 per cent tolerance level for four months in a row.

Repo rate is the rate at which the central bank lends short-term funds to banks.

In line with the rate hike by the RBI, some banks and non-banking finance companies too had raised their lending rates, which will essentially lead to an increase in EMIs for borrowers.

On Wednesday, RBI decided to increase the existing limits on individual housing loans by cooperative banks.

Accordingly, the limits for Tier I or Tier II urban cooperative banks shall stand revised from Rs 30 lakh or Rs 70 lakh to Rs 60 lakh or Rs 140 lakh, respectively, which essentially means doubling of the limit.

The increased limits will apply for Primary (Urban) Co-operative Banks (UCBs), and Rural Cooperative Banks (RCBs) -- State Cooperative Banks and District Central Cooperative Banks.

For RCBs, the limits will increase from Rs 20 lakh to Rs 50 lakh for such banks with assessed net worth less than Rs 100 crore; and from Rs 30 lakh to Rs 75 lakh for other such RCBs.

Besides, considering the growing need for affordable housing and to realise their potential in providing credit facilities to the housing sector, the RBI decided to allow State Co-operative Banks (StCBs) and District Central Co-operative Banks to extend finance to Commercial Real Estate - Residential Housing (CRE-RH) within the existing aggregate housing finance limit of 5 per cent of their total assets.

Following are some of the reactions from real estate experts and developers on the RBI's measures:

Rohan Pawar, CEO of Pinnacle Group said, during the pandemic, the low interest rate regime had boosted the housing demand, and RBI's decision to hike the interest rate again by 50 basis points to 4.90 per cent was expected to tackle the tight inflation of the country.

"The increase of rates could adversely affect housing demand because of increased EMIs and lower eligibility on home loans. This will create an impact on the ongoing growth momentum in the sector in addition to increasing input costs. However, we still believe that preference of homebuyers for owning a home will continue to boost demand."

Niranjan Hiranandani, Vice Chairman of NAREDCO said, taming steep inflation hike is a preordained measure by RBI, given the global economic ballgame. Soaring commodity prices especially with food and energy prices, plummeting currencies, supply side shocks are the foremost reasons for rising input cost.

"It is evident that home loan interest rate hike will impair the home buying rally as pay out in terms of EMI is scheduled to rise. But according to me this crater in demand sentiment is a makeshift move, as home loans are based on floating rate for a long tenure. The EMI constraint will be eased as rates are expected to normalise once the global situation is stabilised."

The hike in the limit of individual loans by co-operative banks by 100 per cent is a welcome initiative for home buyers who opt for home loans from co-op banks.

Atul Goel, MD of Goel Ganga Group said, the RBI's step to increase the repo rate has been on the expected lines. To curb inflation, the regulatory bodies in India were required to control liquidity circulation in the economy. For a few months, the inflation rate has been above 6 per cent, which is beyond the RBI's safe zone.

"If not controlled, the inflationary pressure could destabilise an otherwise bullish Indian economy. Although the recent step will increase the home loan rates, an unstable economy is not conducive to the overall health of the real estate industry. For the industry to operate optimally, it is important that the economy continues to grow in a stable, inclusive, and steady fashion."

Suren Goyal, Partner at RPS Group said, the group welcomes the step of the apex body to increase the overall repo rates and believes it will help in clamping down inflation and smoothen economic growth.

"A rise in inflation can soften the stance on an otherwise robust real estate industry. Already raw material prices are increasing and an unbridled rate of inflation will further drive the input costs northwards, therefore resulting in cost overruns for the developer fraternity."

Manoj Gaur, CMD of Gaurs Group and President- CREDAI NCR said it has been a fine balancing act by RBI.

"We understand that the hike in repo rate by 50 basis points will impact interest rates of consumer loans and make home loan dearer right at the time when real estate sector was coming out of the throes of pandemic and affect sales in the short term. However, by reining in inflation it will ultimately benefit the real estate sector that is bogged down by high input costs."

Amit Modi, President of CREDAI Western UP opined that the increase in the repo rate will hamper the sentiments of the buyers, especially first time home buyers who are heavily reliant on home loans.

"It will be a barrier to the growth trajectory of the revived sales post-Covid. Millions of homebuyers will be sidelined and alienated from the property markets after the hike. It will slow down the pace of sales that has taken a rise in the recent past."

Pradeep Aggarwal, Chairman of Signature Global (India) said the repo rate hike could be termed as a reformative move, the stated aim was clear in current macro and micro economic conditions.

"There was no other option left but to rein in inflation through monetary control measures. This might slightly influence real estate, but it will not impact consumer confidence or demand. Simultaneously, increasing the 100 per cent limit of individual loans by apex bank for co-operative banks, would surely spread a positive communication among each stakeholder."

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