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No change in the pre-GST review by RBI

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With the biggest tax reform in the country to be implemented from the first day of the next month, today’s bi-monthly monetary review came out with no surprises as India’s central bank governor Dr. Urjit Patel kept the key rates unchanged in it’s second policy review for the FY 2017-18. With the apex bank currently holding excess liquidity and the economy unable to tackle the growth slowdown, keeping the rates unchanged was a balanced and cautious move, also keeping in mind the implementation of the Goods and Services Tax (GST) from 1st of July.

With today’s decision in the monetary review, Repo-Rate remains unchanged at 6.25 percent, Reverse Repo Rate at 6 percent, Marginal Standing Facility (MSF) at 6.50 percent and Cash Reserve Ratio (CRR) at 4 percent respectively. Although, the Statutory Liquidity Ratio (SLR) has been brought down by 50 basis points to 20 percent from 20.5 percent previously, which will take effect from the fortnight beginning 24th June. In the post demonetized era, RERA implemented across the country with majority states still to follow suit and GST to come up next; residential demand and prices are expected to make an upward movement. Realty experts and stalwarts feel that this monetary review should have provided a rate cut as prices after RERA and GST are projected to go up.

Industry Reacts:

Avneesh Sood, Director, Eros Group

Looking at the market dynamics, we were projecting the RBI to maintain the status quo as it is currently holding high liquidity and a historic tax reform in the form of GST is in the pipeline. A balanced move today will allow the market to absorb the upcoming impacts from GST on various industries and sectors. The next policy review might allow the RBI to cut repo rate, the benefit of which might be passed on by the banks in the near future.

Manoj Chaudhary, MD, Airwil Infra Ltd.

We were anticipating a rate cut this time which would have pushed the banks to further reduce the lending rates. Any reduction in lending rate allows the sentiments to improve as the net cost on the buyer for the housing unit gets decreased. With RERA and GST to have a joint impact on the realty sector, a rate cut this time could have provided a much needed breather for the sector, its players and the buyers as well.

Dhiraj Jain, Director, Mahagun Group

Even though the RBI has not cut the repo rate today, still there is a lot of room for the banks to further reduce the lending rates. The previous repo rate reductions by the apex bank are yet to offer the complete results; that is held by the banks. A lending rate of 6-7 percent is ideal for our realty sector as we are moving towards strong policy changes at the national level which will leave long term effects on the realty sector and its allied industries.

Kushagr Ansal, Director, Ansal Housing

A rate cut of 25 bps could have helped ease the pressure off the market which has been balancing itself through the confusion still pertaining with RERA. With GST to become operational from July, prices for properties are expected to shoot up. During such scenarios, a slash in repo rate would have meant drop in home loan rates by banks, which ultimately reduces the burden off the buyers. With no change today, we expect the market to run uniformly with a static demand in the short run.

Deepak Kapoor, President CREDAI-Western U.P. & Director, Gulshan Homz

This decision of RBI to keep the rates unchanged will prove very substantial in the first quarter post GST is implemented. Before questioning the judgement of the apex bank on holding the rates, one must not forget that it has to keep sufficient cushion for the economy with the massive changes that will come about in the next few months in form of REITs, InvITs, GST, and SPVs.

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