Home Loan Rates May Not Go Down Too Much As RBI keeps Repo Rate Unchanged

New Delhi: The Reserve Bank of India has kept the Repo rate unchanged at 5.15 percent in its monetary policy committee held today.

This has come as a disappointment to the industry, especially real estate, which was expecting a cut in the rates. 

Today’s review was the last monetary policy review in this fiscal.

The Reverse Repo Rate also remains unchanged at 4.90 percent. The RBI said that it will maintain 'accommodative' policy stance for as long as it takes. The committee voted 6-0 in favour of keeping the rates unchanged. The present rates are at 10-year low. 

It also kept the Cash Reserve Ratio of scheduled commercial banks unchanged at 4 percent.

"On the basis of an assessment of the current and evolving macroeconomic situation, the MPC at its meeting today decided to continue with the 'accommodative stance' as long as it is necessary to revive growth, while ensuring that inflation remains within the target," RBI said in a policy statement.

"Though a rate cut would have been welcomed by the real estate sector as a sentiment-boosting factor, a meager change in repo rates would have done little to significantly boost consumer sentiments. However, in a major relief to the real estate sector and further complementing many of the previous initiatives by the government in 2019, RBI has decided to extend the restructuring of project loans by a year. Loans for projects that have been delayed for reasons beyond the control of their promoters have been extended by another one year without downgrading the asset classification. This aligns with the treatment accorded to other project loans for the non-infrastructure sector" said Anuj Puri, ANAROCK Property Consultants. 

“We are delighted with the MPC stance that has taken note of the concerns of the real estate sector making significant announcements today. With the lower provisioning requirement for retail loans extended to housing segment, we hope that the new measure will translate into lower cost of loans for home buyers as well,” said Shishir Baijal, Chairman and Managing Director, Knight Frank India.

"Considering inflation above the comfortable level, RBI as expected has kept the rates unchanged and kept stance open for rate cuts in the future. The dependence for demand spur will be on rationalisation of personal income taxes for demand growth," said Piyush Gupta, MD-Capital Markets India at Colliers International.

“Holding on repo rate twice indicates growth on backburner, eyes on inflation targets. RBI’s decision to grant extension of date of commencement of commercial operations for project loans for commercial real estate would complement the government’s initiatives for the real estate sector,” said Niranjan Hiranandani, President -NAREDCO. 

"The central bank has kept the repo rate unchanged at 5.15 percent and maintained its accommodative stance in the backdrop of relatively high inflation levels and recent fiscal measures. The real estate sector has been in particular benefitting from rate cuts which were transmitted to some extent through mortgage rates and repo linked loans to end consumers. The repo rate breached the 10-year low mark in October, 2019 at 5.15 percent. The past trends indicate that further rate cuts would have been ineffective in reviving growth. The revival of economic growth depends on the balance between fiscal and monetary policies which weigh on the consumer sentiment,” said Ramesh Nair, CEO & Country Head, JLL India.  

“The status quo maintained by RBI is on the expected lines. But, the apex bank’s decision to allow banks to deduct incremental credit disbursed by them as retail loans for automobiles, residential housing and loans to micro, small and medium enterprises (MSMEs), from their net demand and time liabilities (NDTL) for maintenance of cash reserve ratio (CRR) will primarily mean that banks will have to deposit lesser amount with RBI as CRR, which will increase their lending capabilities,” said Dhruv Agarwala, Group CEO, Housing.com, Makaan.com and Proptiger.com .

“The policy annoucemnt by RBI is thoughtful and encouraging as it will further boost the credit flow to the stressed realty sector,” said Jaxay Shah, Chairman, CREDAI National.