‘RBI’s status quo on rates to provide fillip to realty sector’

The Reserve Bank of India’s (RBI) decision to maintain the status quo on policy rates would provide a fillip to the realty sector, said Ramesh Nair, CEO & Country Head, JLL. The RBI’s decision reflects its patient approach, despite increasing crude prices, a weakening rupee, geo-political risks and rising trade protectionism, he added.

Maintaining the status quo on policy rates is a welcome step for the real estate sector as it will give a much-needed impetus to the housing market, which has been showing signs of revival in the last six months.

For home buyers, the timing could not have been better as lending rates are not expected to increase from current levels. Besides providing a major fillip to buyer sentiment, RBI’s move should also boost demand.

“In its monetary policy today, RBI has taken the unexpected stance of keeping the repo rates unchanged. This is surprising and contrary to the industry's expectations, which is skewed more towards an increase on the back of increasing inflation and depreciation of the rupee,” said Anuj Puri, Chairman, Anarock Property Consultants.

He added: “This move could have been seen as favourable for the real estate sector in the short-term; however, banks started increasing their lending rates even before the monetary policy was announced. It is, in fact, a worrisome development from a macro-economic, long-term perspective. It will result in increased fiscal deficit, which does not bode well for any industry, including real estate, and also in further erosion of the rupee's value.”

Anshul Jain, Country Head & Managing Director, Cushman & Wakefield India said: “An unchanged repo rate after two successive hikes was a surprise. However, lower inflation expectations and an uptick in manufacturing and construction activity, with an associated increase in FDI and robust GDP growth, gave RBI some head room to keep the rate unchanged. Services sector growth has moderated due largely to base effects, but growth in agriculture and higher foodgrain production has helped keep food inflation in check. Government spending on infrastructure has also helped in gross capital formation improving.”