Post GST era’s first rate cut

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NEW DELHI: With the Goods and Services Tax (GST) completing its first month of operations, today’s RBI bi-monthly policy review offered a huge sigh relief as the apex bank cut down the Repo rate by 25 basis points, bringing it down to 6 percent from 6.25 percent previously. Riding high on the decreased inflation for the last couple of quarters, a rate cut was pretty much on the cards today. This review by RBI was the third for this financial year 2017-18 and fourth for the running calendar year.

After today’s monetary review, Repo rate drops to 6 percent, Reverse Repo rate reduced to 5.75 percent from 6 percent, Marginal Standing Facility (MSF) adjusted at 6.25 percent, Cash Reserve Ratio (CRR) remains unchanged at 4 percent and Statutory Liquidity Ratio at 20 percent respectively. Real estate sector in particular was in dire need of a rate cut as the buyers are waiting for the home loan rates to come down further and developers are gearing up to offer the benefit of the input tax credit to them.

The overall prices or the impact of the cost on the buyers is projected to come down because of GST, and interest rates are expected to be dropped by the banks, the combined effect of which will be fruitful for the sector. With the festive season fast approaching in a month’s time, today’s rate cut will allow the banks to pass on the benefit to the customers soon which will result in greater footfall in the months to come.

Industry Reacts:

Abhishek Bansal, Executive Director, Pacific Group: Inflation is recording new lows with the last two quarters, observing a great feat. The stock market on the other hand is achieving greater heights, thus signalling a strong market response and getting ready for the long run. Today’s rate cut will only add more weight to the sentiments and push the customers to move towards investments where real estate sector will greatly benefit. As GST is settling down and RERA gaining momentum, real estate sector is projected to become the investment hub very soon. –

Avneesh Sood, Director, Eros Group: Implementation of GST has completed its very first month and a great response can be already observed as the buyers’ queries are increasing day by day. A rate cut at this moment will boost these sentiments further where footfalls and conversions are bound to increase. Final festive season of this calendar year is nearing and this rate cut can allow the banks to cut down on their lending rates further. Economy is shaping up well with a growth trajectory becoming visible for the real estate sector as well.

Gaurav Gupta, General Secretary CREDAI-RNE & Director, SG Estates: Indian real estate market is moving strong towards a new era where GST and RERA are leading the way from the reforms front. Pricing, on the other hand remains a vital player for Indian consumers and any dip there is inversely proportional to the demand for property. A reduction in Repo rate today, happening after October 2016, will push the banks to further reduce the lending rates. With transparency increasing in the sector, the low pricing factor will help boost the property demand and further clear the inventory in macro real estate regions.

Deepak Kapoor, President CREDAI-Western U.P. & Director, Gulshan Homz: The realty sector welcomes the repo rate cut by RBI today which is further expected to fuel the demand as the EMIs are expected to fall even more. This rate cut has come at a time when GST and RERA have entered in to a settled phase and the sector is observing a transition where the buyers are increasing their activity and developers eagerly waiting to satisfy the demand. GST’s input tax credit feature coupled with lowered EMIs will further reduce the burden off the buyers and pave way for strong demand-supply matrix in the sector.

Rakesh Yadav, Chairman, Antriksh India Group: The sector was hopeful for a rate cut today and after almost 9 months, RBI has decreased the key rate by 25 basis points. Banks must follow suit in order to pass on the benefit to this sector’s customers. This rate cut has happened in the post GST and RERA era, where customers are looking towards a much transparent and simplified sector where any fall in the cost to the buyers will further enhance the demand for property.

According to Mr. Pankaj Bajaj, President, CREDAI NCR “It is a welcome cut. More importantly, we hope that the banks will pass on the rate cut to the retail borrowers. Given that the demand for housing is weak at the moment with the current home loan rate of around 8.5% per annum, we are looking at deep cuts in the rate to revive the demand. We hope that the banks will transmit the past and current rate cuts by RBI to bring the home loan rates to between 7 and 7.5% per annum. We think that that will be the inflection point for revival of demand”

Prashant Tiwari, Chairman, Prateek Group, said “Reduction in the repo rate was an awaited move which will improve the overall market sentiments. The result of this rate cut will be reaped by home-buyers in the form of reduced home-loan interest rates. Moreover, with fall in interest rates, the demand for home loans will also continue to grow stronger. We hope home buyers will take full benefit of this golden opportunity as there couldn’t be a better time than this to invest in property market”.

According to Owais Usmani, MD, Presidency Infraheights “We hope that market will see an upsurge of buyers willing to enjoy the likely rate cuts by the banks. Until and unless banks decide to pass on the benefits it would be difficult to gauge the effects of RBIs step, which came at a time when economic growth is slow. Another aspect is that right now real estate developers are focusing on RERA and GST compliance, projects are not being launched and many projects are stuck. In such a scenario, it can be said that effects will be visible only after some time”.

Saurabh Jindal, Joint Managing Director, SVP Group, said “It was an anticipated move by the RBI as economic activity was at a low for the past two years. By reducing the rates RBI has given a window to the banks to pass on the benefit to the home loan seekers. Hopefully, this step will make more buyers to come forward and realise their dream of owning a house. We should also understand that real estate prices are at all time low and if banks passes the benefits to home loan seekers then this would be the best time to invest in property.”

Pradeep Aggarwal, Co – Founder & Chairman, Signature Global: Implementation of GST has completed its very first month and a great response can be already observed as the buyers’ queries are increasing day by day. This rate cut has come at a time when GST and RERA have entered in to a settled phase and the sector is observing a transition where the buyers are increasing their activity and developers eagerly waiting to satisfy the demand.

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