Stakeholders in the Indian real estate and construction industry react favourably to the Reserve Bank of India’s announcement, January 15, of a 25 basis points reduction in its policy rates, which is expected to boost growth and lift market sentiment.

Good beginning, but more expected

Rajesh-Prajapati

It is a first step among the many expected, and a long awaited one, which will propel the growth of the real estate industry. We are happy to now see a possibility of single-digit home loan rate after many years which will act as a catalyst, attracting and making possible more and more home buyers to buy their dream homes. We are also happy to see these positive steps initiated by the government. The real estate industry has long been neglected and it is time now that we are granted industry status. It is the second largest employment generator in the country, only after agriculture.
Rajesh Prajapati, Managing Director, Prajapati Constructions

Positive indication of brighter days ahead
Pradeep-JainIt was a much-awaited move by RBI, though it came as a surprise. In fact, this decision was on the cards. Inflationary pressures are working below the expected trajectory since July last year giving RBI a much desired space to free its arms. The real estate sector has been struggling since last three quarters with lower demand and increasing inventories. The latest decision would help reduction in EMIs thereby encouraging fencesitters to conclude deals. Developers would also get funds at comparatively lower rates. The rate cut decision is also a positive indication of brighter days ahead. We expect banks would also lower their interest rates with immediate effect. We expect this year’s Union Budget to also bring some cheer to the industry and real estate sector, in particular by awarding it infrastructure status which will enable it to seek long-term loans at a lower interest rate.
Pradeep Jain, Chairman, Parsvnath Developers

Boost to stakeholder sentiment for capital commitments
Shishir-BaijalThe RBI’s decision to slash repo rate by 25 bps is, indeed, a positive move which shall largely benefit the debt burdened developers and stretched households alike. This decision will also boost stakeholder sentiment for capital commitments. While lower interest rate alone may not be a reason for celebration for the real estate sector, however, a definitive indication about its future direction is reason enough to put consumer sentiments at a higher pedestal and infuse a sense of optimism.
Shishir Baijal, CMD, Knight Frank India

A measured and steady approach to growth
Sanjay-Dutt2015 seems to be off on a good start with the repo rate cut announced by the RBI being a good indicator that with inflation now being under control, the government and the RBI are going to keep taking the necessary steps to boost economic growth. It is still a measured and steady approach as economy needs much more than 25 basis point reduction. The impact of this move on the real estate sector will be manifested only when commercial banks lower their lending rates. Leading banks may actually lead the obvious reduction. However, demand from end-users may take a bit longer to actually transform into active buying; inquiries may increase in the short term as buyers may begin to shortlist properties in anticipation of lowering of interest rates. Meanwhile, this move by the RBI would still instil hope and confidence in the real estate industry that a recovery in housing sales is around the corner. We think job confidence and better increments in salary will boost demand and the end results will be increased housing sales. If all was to come through, this could be “Achhe-Din Part 1.”
Sanjay Dutt, Executive MD, South Asia Cushman & Wakefield

Sentiment will boost demand, stimulate growth
The RBIDavid-Walker_sn cutting rates is confirmation that inflation and future expectations of inflation are well within RBI’s comfort zone of 6 per cent. The 25 bps cut in the repo rate is an inflection point and further cuts are expected in the future months. This measure will definitely cheer up the markets and financial institutions will pass on this reduction to customers. This in turn will give buyers confidence that with lower EMIs property purchase are more affordable, and now is the right time to buy a home. This sentiment will help boost demand and stimulate growth.
David Walker, Managing Director, SARE Homes

A confidence building move for new home buyers
Nayan-ShahIt is a very positive sign that Dr. Raghuram Rajan has initiated. It is first rate cut after 2013. This will induce banks to offer new home loans at a rate below 10 per cent after a gap of around four years which will act as a confidence building move for new home buyers; also, lending rates by banks to real estate developers. This shows confidence in the economy and that now inflationary pressure is within control and from now on more growth can be seen.
Nayan A. Shah, CEO & Managing Director, Mayfair Group

Move will act as a catalyst for various reforms
Rohit-Raj-ModiThis will definitely pave the way for much required liquidity in the market. We have been raising the concerns of developers over higher rates from the government. We are happy that RBI has taken a step by cutting the rates. We expect that this will encourage banks to ease their home loan rates as the entire corporate sector will now shift its focus towards the Union Budget. This will help developers to expedite their projects which were otherwise facing fund crunch. Home buyers’ dreams of owning a home would also get a boost as we expect an accelerated purchase cycle. This move by the RBI will act as a catalyst for the various reforms announced for the realty sector by the government in the past. With this, we also see momentum going further in giving the real estate sector a much required push. While it is a welcome step, industry expects deeper cut in the upcoming review keeping in view that inflation has come down.
Rohit Raj Modi, President, CREDAI NCR

We expect a further easing of 75 bps this year
The rate cut by the RBI is a step in the right direction. The RBI governor has said that his glide path for 6 per cent inflation in January 2016 is on track which would indicate further rate cuts in the calendar year. We expect a further easing of 75 bps in the current calendar year. Once banks transmit the total 100 bps of rate cuts to home loan interest rates it would immediately enhance affordability by around 9 per cent for the end customer. We do not expect any immediate translation of 25 bps cut into sales volume growth.
Sandeep Ahuja, CEO, Richa Realtors

Ray of hope for cash-starved real estate sector
Aman-AgarwalIt is, indeed, a welcome move by RBI and will certainly help to lift the market sentiment. A large drop in international crude and other commodity prices has made inflation almost non-existent. Consequently, it was an anticipated step by RBI to boost liquidity. A rate cut at this juncture will, no doubt, add to the existing positive growth impulses and would provide some easy growth excel for the economy. The reduction in rates will accelerate the downward movement of deposit rates and will also translate into lower rates for borrowers. However, it is advisable to make more cut in rates as the lower interest rates will drive the customers to be more focused towards investments in properties. This will certainly send positive signals to the market and will become a ray of hope for the cash-starved real estate sector and would encourage buyers to finalise their deals. We are hoping that in the coming months government will bring more optimism in the form of regulatory policy reforms similar to infrastructure status and single window system.”
Aman Agarwal, Director, KV Developers

Beginning of reversal cycle and a boost to sentiment
Rate cut was expected but the timing was a pleasant surprise. It is the beginning of the reversal cycle and a further boost to sentiment. With inflation expectations reined in on falling commodity prices including crude, the reversal cycle augurs well for real estate, banks and capital goods.”
Rajnish Bahl, Group Managing Director, Centrum Group.

Rate cut will revive the investment cycle
Mahesh-SinghiThe rate cut by the RBI is a positive surprise and a New Year gift of happiness. It may not help much in lenders immediately reducing their lending rates but will certainly help in generating positive sentiment. It also suggests synergised working between Ministry of Finance and Reserve Bank of India. This is a small step in the right direction for the growth phase ahead, especially interest rate sensitive sectors like infrastructure, real estate, banking, capital goods and automobiles. Some of the companies in infrastructure and telecom will find it quite opportunistic, which are either already highly leveraged or whose future earnings are sensitive to the interest rates, with expected commitments towards licensing fees. It will also help in reviving the investment cycle which the government is trying to restore. Going forward, the low interest rates coupled with lowering in crude prices and controlled inflation will boost credit growth in the country, which will further help kick-start the economy.
Mahesh Singhi, Founder & MD, Singhi Advisors Pvt. Ltd

Any reduction is bound to increase economic activity
Rajesh-Narain-GuptaThe RBI decision to cut the repo interest rate by 25 basis point is a welcome sign. This also is in line with the government thinking and may be a signal of a better understanding between the government and RBI which is encouraging. RBI has attributed reduction in the crude prices as one of the reasons. All of us know that there has been significant reduction in crude pricing, however, the government cannot afford to pass on the proportionate benefit to the citizens. The cut shall definitely boost the economic cycle and any such reduction is bound to see increased economic activity. It is a welcome move for the borrowers and the industry. Consumers for the auto industry; housing loans etc. shall be benefited and as a cascading effect these sectors will see more participation. The Sensex has already reacted positive to this development. This is certainly a good omen for a nice budget which India desperately needs.
Rajesh Narain Gupta, Managing Partner, SNG & Partners, Advocates & Solicitors

We expect a meaningful rate reduction over one year
Hari-Prakash-PandeyThis move by RBI signals further easing going forward, the spiral effect of which will be much more widespread, passing on positive vibes across the sectors. This could not have come at a better time as we have already started to witness signs of revival in the real estate industry. We expect customer sentiment to improve on ground and going forward interest costs of companies will also come down. We expect a meaningful rate reduction over the next one year.
Hari Prakash Pandey, Vice President – Finance and Investor Relations, HDIL

Move shows RBI’s shift in favour of growth
Mohit-GoelA 25 bps rate cut by RBI is on expected lines and very much warranted at this stage looking at the strong macroeconomic indicators that have emerged in the last couple of weeks. The quantum of cut could have been more; nevertheless, the apex bank needs to consistently reduce rates and banks must respond with alacrity in equal measure in order to propel investment and spur demand, especially in the housing sector. The move clearly shows RBI’s shift in stance in favour of growth. This is also the correct time to usher in a slew of out-of-policy measures like allowing banks to lend more to real estate, easy funding norms etc. so that the real estate sector plays the role of a catalyst in driving the overall economy.
Mohit Goel, CEO, Omaxe Ltd


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