Monetary Policy 2021 maintains growth supportive stance, industry applauds
Amid raging inflation, the Monetary Policy Committee (MPC) of the Reserve Bank of India met on the 2nd, 3rd and 4th of June to discuss changes which can be made in order to ease the process of recovery of the economy from the pandemic. Some provisions highlighted by the Governor of RBI were as follows:
Repo rate will remain unchanged at 4%
RBI will continue accommodative stance
- Reverse repo rate, bank rate and MSF will remain unchanged
- RBI’s real GDP growth forecast for FY22 is now at 9.5%
- CPI Inflation is projected at 5.1% for FY22
- RBI to buy govt securities worth Rs 40,000 crore
- The RBI also called for reduction of taxes and duties on petrol and diesel
Here is what industry leaders had to say in response to the announcement by the Monetary Policy Committee.
Anuj Puri, Chairman, ANAROCK Property Consultants
“Had it not been for the pandemic the RBI would have definitely taken a different stance for the benchmark rates today. Considering the rate at which inflation is rising presently in the country, the RBI would have sought to increase the key rates. However, since the economy is still under pressure due to the pandemic and inflation is rising due to supply-side issues coupled with overall consumption sluggishness, it has maintained the status quo on benchmark rates.
This is the sixth time in a row that RBI has kept the benchmark rates unchanged, in clear response to the exigencies of the Covid-19 pandemic uncertainties.
It is certainly positive for home loan borrowers as the floating retail loan rates (which are directly linked to external benchmark repo rates) has been at the lowest level of the last two decades. The continuation of this low interest rate regime works very well for all borrowers as the environment of high affordability is likely to continue for some more time.”
Niranjan Hiranandani, National President, NAREDCO
“With the second wave impacting the economy in terms of a slowdown as also the rise in inflation, as expected, the RBI has maintained a status quo on the policy rates, as also continued the ‘accommodative’ stance. The downward revision in FY22 GDP growth projection (9.5%) was also on expected lines.
It is the sixth time consequently that RBI has kept the benchmark rates unchanged. While it reflects a response to the Covid-19 tail loan rates continuing to be at the lowest level over the past two decades.
The low interest rate regime reflects ‘advantage borrowers’ and this is likely to continue for some more time. The RBI has pursued the broad intent of dealing with weak spots in the economy by providing on tap liquidity, with additional lending to distressed sectors”
Shishir Baijal, Chairman and Managing Director, Knight Frank India
“We welcome the RBI’s move to maintain the status quo on key policy interest rates. Although expected, the RBI has continued its growth supportive policy stance. Additional measures to enhance liquidity support to most vulnerable touch sensitive sectors and small businesses; and expanded credit exposure limit for resolution is a great move. As the nation attempts to recover from the second wave of pandemic, there is a dire need to provide monetary policy support - on account of both easy availability and lower cost of funds - to households and businesses alike. Besides monetary policy intervention, as we come out of graded regional lockdowns and further resume economic activities, there is a greater need to provide adequate fiscal support to jump start consumption demand. Demand stimulant measures like credit subsidy or tax waivers even for a limited period can play a transformative role until we reach the pre COVID-19 normalcy thresholds.”
Dhruv Agarwala, Group CEO, Housing.com, Makaan.com & Proptiger.com
“The RBI move to hold the repo rate at 4% in its monetary policy review is along expected lines. Considering there have been widespread economic ramifications of the various lockdowns announced by states to contain the second wave of the virus, this was the appropriate thing to do. However, we expect the banking regulator to announce monetary support to the NHB to revive growth in the real estate sector, which is the country’s second-largest employment generating sector in India.
The developer community might find some support from the central bank’s decision to launch the Resolution Framework 2.0, under which the RBI will expand coverage of borrowers to Rs 50 crore, from the earlier Rs 25 crore. In a move that augurs well for small businesses in the country that are reeling under the impact of the second wave, the RBI has extended the special liquidity facility of Rs 16,000 crore to SIDBI to support MSMEs.”
Ravindra Sudhalkar, CEO, Reliance Home Finance
"The Reserve Bank of India's decision to keep key policy rates unchanged is in line with our expectation.We appreciate the accommodative stance of the RBI given the tough times the nation is going through with the onset of the second wave of Covid-19 pandemic. Although the downward revision of GDP growth forecast for FY22 to 9.5% from 10.5% earlier is a dampener, it reflects the current economic challenges. GSAP 2.0, under which the RBI has proposed to buy government securities worth Rs 1.20 lakh crore in Q2 will open the floodgates of liquidity and is a welcome step."
Sanjay Dutt, MD and CEO, Tata Realty and Infrastructure Limited
“It's good news that RBI continues to maintain the Repo rate unchanged at 4% and the reverse repo rate at 3.35% for the sixth time in a row. However, considering that the economic growth forecast for the current fiscal 2021-22 has been revised to 9.5% from the earlier 10.5%, the Government should ensure that inflation is kept under check. The cost of steel, cement, labour cost and other items have gone up threatening the viability of certain projects especially those who are looking for last mile funding. The residential sector is slowly reviving as people seek to invest in safe havens for peace of mind and security amid this second wave. The rationale of lower interest rates/EMI, attractive prices, ready to move inventory, protection under RERA and attractive schemes from developers, encouraging homebuyers to invest now instead of waiting. While the government has been introducing several initiatives to help the sector, we request for some strategic support in the form of giving us industry status, input credit, allowing FDI in RTMI, single window clearance mechanism at State level, lowered GST on raw materials etc. for sustainable long-term growth and benefit of the developers as well as homebuyers.”
Ashish R Puravankara, Managing Director, Puravankara Limited
“India’s burgeoning real estate sector is one of the core tenets of its economy. The continued accommodative stance by the Reserve Bank of India signals a sustained focus on business continuity and further empowerment of this sector. The unchanged REPO rate at 4% remains to be India’s decadal lowest interest rate. We are optimistic that this will make home loans more affordable, thereby propelling the growth of the housing segment. The recent efforts by the government to amplify the supply and accessibility of the vaccine will also contribute to lending stability to the industry.
While many sectors are experiencing a momentary decline in traction, measures such as on-tap liquidity for contact-intensive businesses within the retail, travel and hospitality sectors will have a positive impact on customer sentiment as well as the retail real estate market. Furthermore, the special liquidity to SIDBI will help revive the confidence among SMEs, thereby, leading to stronger GDP growth.”
Rohit Poddar, Managing Director, Poddar Housing and Development Ltd
“With the mutated second wave and the fear of the third wave, the apex bank's decision to keep the repo rate unchanged at 4% reflects the continuation of its accommodative stance ensuring the lowest lending rates to keep business operational across sectors. Policy has been in line with the market expectations , the only difference is G-sap being shared with SDLs. The enhancement in the restructuring limit and expanding the priority sector is a welcome move as it will largely help the entire MSME sector for credit borrowings. The reserves clocking $600 billion is a relief and will potentially help in dealing with global spill over challenges. Overall , measures announced by RBI will help boost the market confidence to push financial conditions of the business on the growth path. Consumption demand is the only way India's economy and industry can thrive. The need of the hour is high-speed vaccinations, which will assist to stabilize business across the country, resulting in increased consumption.”
Ramani Sastri, Chairman and MD, Sterling Developers Pvt Ltd
“It goes without saying that the real estate industry's perennial hope is fixed on lower interest rates. Any further reduction of the repo rate would have aided in ensuring adequate flow of capital in the market. However, home loan interest rates have already gone down substantially in the recent past, and are presently at an all-time low. Homebuyers will continue to take advantage of the lowest ever home loan interest rates and with the emerging need, the demand for housing is going to sustain as it is a safe-haven asset and many fence-sitters will take the plunge and make the purchase once the situation normalizes. There was a major revival in the residential sector recently despite the pandemic last year. The second wave of the pandemic may have disrupted the recovery of the real estate sector to some extent but we expect a strong revival in the second half of this fiscal and the long-term outlook remains healthy. As the states are in the process of easing lockdowns, the real estate industry would need all-around support and quick assistance to pick up their business thread again.”
Ankit Kansal, Founder and MD, 360 Realtors
“It was expected that RBI will keep the Repo Rate unchanged and avoid temptations to further inject liquidity due to the downside risk of inflation. As steel, cement, and crude oil prices are increasing, there is a mounting pressure of inflation and maintaining an accommodative stance is a benign choice. Coming to real estate, pent-up demand, structural transformations, and a healthy economic outlook ( ~ 8-9% for FY22) will drive the market in a positive direction. However, governing agencies should look into rising prices of key construction materials such as cement and steel. Prices have hiked exorbitantly in recent months and if not contained, it will undermine and stall a lot of construction activities.”
Anurag Mathur, CEO, Savills India
“The Reserve Bank, while maintaining the status quo on benchmark lending rates for the sixth consecutive time, has emphasised on striking a fine balance between growth prospects and range bound inflationary target. The accommodative stance comes in the backdrop of a GDP growth rate of 1.6% in the last quarter of FY21. Although complete evaluation of the economic impact of the second wave of infection continues, the real GDP growth for FY22 has been projected at 9.5%. The real estate sector is expected to continue benefiting from the pass-through of low benchmark lending rates to end consumers, especially in the residential segment. Interestingly, the recent legislation on Model Tenancy Act by the centre furthers the belief that the government is earnest in its attempt to provide impetus to the affordable segment and rental housing market alike.”
Image: RBI Governor, Shaktikanta Das