RBI holds interest rates for now; realty industry expresses disappointment

The Reserve Bank of India (RBI) has held interest rates steady during its policy review on Tuesday. This was a move that was widely expected. But the Governor of RBI, Raghuram Rajan has indicated that the interest rates might be cut early next year if the inflation eases further and if fiscal developments are encouraging. The central bank has also indicated that the rate cut could happen outside the policy review cycle. The next review will happen in February. According to reports, the cut could happen either in February or  April.

“A change in the monetary policy stance at the current juncture is premature,” the RBI said.

Currently the repo rate stands at 8%. This is the rate at which the RBI lends to other banks. The repo rate has a direct impact on home loan rates and a hike in this rate would mean that anyone who took a home loan will have to pay more.

Not everyone seems to be entirely pleased with this move. The Confederation of Real Estate Developers’ Associations of India has expressed its disappointment with the central bank’s decision.

C Shekar Reddy President CREDAI – National, said, “The RBI decision to keep the key rates unchanged will not help the real estate sector development. Presently the overall inflation is under control as expected by the RBI, the crude oil prices are also low, the overall business requires an upword momentum.  A reduction in policy rates at this juncture would have a significant impact in boosting the industry and facilitating growth. Even the housing & finance ministry are advocating that the interest rates should be brought down for the developers and end user to promote the mission “Housing for all”.  The real estate sector has been struggling with high cost of labor, material & funds along with the moderate demand over the last few months. There is a strong need to lay out clear policy and lower the cost of borrowing to help developers focus on development and increase the supply of homes. To achieve the mission ‘Housing for all’ a stimulus is required in the form of interest rate cuts, interest subvention and tax cuts to propel the demand and encourage supply for housing.”