RBI cuts repo rate by 25 bps

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The Reserve Bank of India on Thursday cut the repo rate 25 basis points to 6.25 per cent. This is the first time in 17 months that the central bank has lowered the rates. The last rate cut happened in August, 2017. The repo rate is the rate at which the Reserve Bank lends short-term money to the banks.

The six-member monetary policy committee (MPC) headed by Governor Shaktikanta Das changed the stance of the policy from 'calibrated tightening' to neutral.

“The RBI’s decision of the repo rate cut of 25 basis points to drop to 6.25% is a welcome surprise that will definitely prove to be beneficial for the real estate sector. We believe that investors are likely to regain interest in the real estate sector because this country will continue to grow thus positively impacting the growth of the industry. Additionally, the changing stance of the RBI from “Calibrated Tightening" to "Neutral", gives the sector the boost it had been hoping for a while now.” Expressed Sanjay Dutt, MD & CEO, Tata Realty Limited

The bank cut the reverse repo rate cut to 6 per cent but kept the Cash Reserve Ration (CRR) unchanged at 4 per cent. The reverse repo rate is the rate at which the central bank borrows money from commercial banks.

Dr.Niranjan Hiranandani - National President, Naredco and Founder & MD, Hiranandani Group went on to add, “The repo rate now will be 6.25 percent, while the reverse repo rate stands reduced to 6 percent. This is the perfect follow-up to the Budget Speech by Finance Minister PiyushGoyal, and this will not just enhance liquidity in the economy but also boost investment and give the economy a positive growth phase.”

Boman Irani, Chairman & Managing Director, Rustomjee Group expressed “The drop in repo rate was the actual requirement for real estate sector in the current scenario given the recent budget announcement that paved the way to opening investment market for second homes. The announcement is parallel to government’s ‘Housing for All’ vision as it will give real estate sector the necessary fillip which was requisite particularly since the year has just begun.”

Manoj Gaur, MD, Gaurs Group and Vice President, CREDAI National said “With RBI reducing the repo rate after keeping it unchanged since last two monetary policy reviews, it shows a softer stand towards lending. I am sure Bank’s would surely reduce the lending rates, though marginally, which can boost the sentiments in the market. Also with the push which the government showed towards affordable segment in the budget 2019 where the income tax rebate was extended to 5 lac, I am sure end users would now be more motivated, to purchase their homes, post the repo rate cut.”

“The drop in repo rate was the need of the hour in the current state of affairs in real estate especially affordable housing. The announcement is in sync with recent budget announcement giving housing sector the necessary push.” Shared Amit Ruparel, Managing Director, Ruparel Realty.

Shishir Baijal, Chairman & Managing Director, Knight Frank reflected that “The reduction in REPO and Reverse REPO rates by the RBI by 25 BPS is a welcome move, which we hope will provide a further fillip to the demand side for real estate. As a result of this reduction, we hope that banks will pass on the benefits of the revised rates to the end consumer of loans, thereby making it easier for them to make their purchase decision. For a sector which has been suffering from poor end user demand for some time now, this is a step in the right direction.”

Amit B. Wadhwani, Co-founder, Sai Estate Consultants Chembur Pvt Ltd is of the opinion, “The cut in repo rate in today’s policy announcement will act as a catalyst in reviving the real estate sector which was crippled with the financial crunch in the system. This will play a large role in bringing an equilibrium in the demand and supply economics of the Indian real estate industry.”

Pradeep Aggarwal, Co-Founder & Chairman, Signature Global and Chairman, National Council on Affordable Housing, ASSOCHAM also added his views, “This move will be a big boost for affordable housing and help for first time home buyers also the rate cut brings fetches confidence for the market as this will make availability of more money at the banks thereby lowering the EMI burdens.”

Rajan Bandelkar, President, NAREDCO West opined, “The 0.25 basis points  rate cut is a welcome stance and will lead to an increase in sales as there will be  a dip in the interest rates on home loans, thus enabling buyers to make realty purchases, in both residential and commercial space.”

Manju Yagnik, Vice Chairperson Nahar Group & Vice President NAREDCO (Maharashtra) said that, “It will help in ensuring that the monetary policy is aligned with fiscal policy and keeping in mind the balance between supply and consumption. As for the sector, reduction in home loan rates will definitely boost sales and ensure regular cash flow. The decision of changing the MPC’s stance from calibrated tightening to neutral may welcome more positive changes in the forthcoming policies.”

Parth Mehta, Managing Director, Paradigm Realty, “This cut by 25bps to 6.25% is inline with our expectations as there is a serious liquidity crunch faced by the banks and NBFC resulting in Dampening of overall business environment. Since the inflation is in check cut is a logical move by RBI to induce required liquidity.”

RBI revised down the CPI inflation estimates to 2.8 per cent in March quarter, 3.2-3.4 per cent in first half of next fiscal and 3.9 per cent in Q3 of FY'20.

It has forecast GDP growth of 7.4% for FY20 with the first half growth expected to be in the range of 7.2-7.4% and 7.5% in the third quarter. The bank removed restrictions on Foreign Portfolio Investors investing in corporate debt market.

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