Industry reaction on RBI’s monetary policy
Oct 30, 2013
Source : The Times of India


BANGALORE: Pankaj Bansal, director, M3M India, As anticipated, RBI has returned to a more normal monetary policy situation by cutting the MSF and raising the repo rate. This may result in further increasing the cost of funds for any industry or end consumers. Further dampening demand and industrial production. Demand for affordable and mid-end real estate projects may be adversely impacted due to a possible hike or adjustment in home loan rates.  Expensive properties may not be negatively affected drastically as their demand is relatively inelastic and volumes not very large.

Irshad Ahmed, president, Bangalore Realtors Association India (BRAI)

This will definitely dent the buyer sentiments further. Sales have dropped considerably across all the metros and this move will have a damaging effect on the realty markets.

Gaurav Gupta, Joint Secretary, Raj Nagar Extension Association

The sole purpose of increasing the repo rate by the apex bank was to curtail the prevalent inflation regime. As a part of the real estate fraternity we expected relaxation in repo rate and the existing CRR which would have brought sigh of relief from the liquidity crunch most developers are going through.

Mehul Thakur, director, Viva Homes

The increase in repo rate will have a corollary increase in finance rates and bank lending rates. Even with a nominal increase in bank interest rates, the EMI increases substantially. This will put a strain on existing home loan buyers and also lead to postponement on home buying decisions by those who are anticipating a decrease in residential rates in the festive season. The onus ultimately will be on Developers and Banks to give appropriate cushioning to customers so that they don’t feel the pinch of high interest rates.

Brotin Banerjee, MD & CEO, Tata Housing:

RBI’s move to increase the repo rate is on expected lines as guarding against inflation and normalising the rupee is the priority. However, prospects for the real estate industry are already muted due to high interest rates and high cost of construction. This is acting as a dampener on consumer sentiment in the run-up to the festive season. The apex bank needs to ensure that it takes essential steps to support the economic growth, considering the low investor and consumer sentiment prevalent in the market. Need to have policies to drive real estate growth as this is the second largest contributor to our GDP.

Anshuman Magazine, Chairman & MD, CBRE South Asia Pvt. Ltd.

Increase in repo rate and reduction in MSF rate will hopefully not result in an increase in home loan interest rates. Even a small rise at this point could dampen the festive sentiments of home buyers and will not auger well for the industry.

He appreciated the reduction in the MSF rate by 25 basis points to address long-term inflationary trends, adding that, “The government should look at fresh investments in infrastructure and real estate and thereby create jobs. This will help in reviving the sagging economy to some extent.

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