RBI decision comes at a time when the realty sector is still saddled with 6.56 lakh unsold housing units (as of Q3 2019) across the top 7 cities including Mumbai.
Realty players have termed the Reserve Bank of India’s decision to lower the repo rate by 25 basis points to 5.15% as "tepid and a notional nudge," saying that its efficient transmission by banks to lower cost of capital is need of the hour.
Further, a substantial rate cut is required to stimulate consumer demand, they said.
RBI decision comes at a time when the realty sector is still saddled with 6.56 lakh unsold housing units (as of Q3 2019) across the top 7 cities including Mumbai, and developers are struggling to raise funds to complete projects and launch new ones.
Knight Frank India CMD Shishir Baijal said a slew of factors such as slowing economic output, rising unemployment rate and low consumer confidence have hindered the percolation of these small quantum rate cuts to the economy at large.
"On this backdrop, another 25 bps rate cut comes as a disappointment, more so for the real estate sector. The aggravating non-banking financial company (NBFC) liquidity crisis is severely impacting credit availability for the industry, especially developers, as they struggle to raise even construction finance. Lack of liquidity stimulus will only worsen the situation further. Therefore, a substantial rate cut to reinvigorate end consumer demand and intervention on real estate sector-specific lending provisions could have been a better intervention at this juncture," he added.
National Real Estate Development Council (NAREDCO) national president and chairman of Hiranandani Group Niranjan Hiranandani said with the short term liquidity squeeze prevailing in the economy, even positive net worth companies across the industries are turning into the negative balance sheet.
"The current economic scenario makes it the right time for RBI to announce its one-time rollover scheme similar to that was rolled out during the Lehman crisis in 2009 under the global slowdown scenario, which shall act as remedy to the ailing companies,” he noted.
However, ANAROCK Property Consultants chairman Anuj Puri said the rate cut comes close on the heels of the recent announcement of setting up a stress fund of Rs 20,000 crore to provide last-mile funding to projects stalled due to lack of capital.
This fund needs to get into action soon and demonstrate meaningful results to improve the sentiments of industry stakeholders like financial institutions, private equities, developers and home buyers.
"An announcement regarding the real-time deployment of the stress fund during the festive season can dovetail well with this rate cut and yield a positive consumer response," he viewed.
Sunteck Realty CMD Kamal Khetan hoped that the banks will now accelerate the transmission of the RBI rate cuts to the common man to improve the demand and consumption across all sectors.
"The 5th consecutive rate cut has definitely sent a strong signal for the real estate sector to expect growth in sales at the onset of a busy festive season,” he hoped.
Ashwin Sheth Group director Chintan Sheth observed that RBI’s recent mandate on directly linking repo rate with fresh home loan rate was much needed to ensure immediate transmission of rate cut. "We request the government to take necessary steps to create housing demand across segments in this slowed economy."
JLL CEO & Country Head (India) Ramesh Nair said credit re-structuring measures such as the introduction of repo-linked loans will lead to further transmission of rate cuts to end-consumers.
"This will positively impact the home buyers’ decisions to buy homes while ensuring higher transparency," he opined.
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