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Real estate players not surprised with unchanged repo rate



unchanged repo rate

Stakeholders however welcomed the move to allow banks to invest in REITs and InvITs.

NEW DELHI: Real estate players remained unsurprised as Reserve Bank of India kept the repo rate unchanged at 6.25% on Thursday.

“The decision to keep the repo rate unchanged at 6.25% is on expected lines because of the liquidity scenario and inching up of inflation,” says Shishir Baijal, Chairman & Managing Director, Knight Frank India.

The real estate players however welcome the central bank’s move to allow banks to invest in Real Estate Investment Trusts (REITs) and infrastructure Investment Trusts (InvITs) within the 20% umbrella limit. They expect that the move will bring-in much needed liquidity in the commercial real estate segment.

“It will allow banks to invest in an important asset class thereby providing much needed boost to this segment. Owing to better liquidity, the cost of capital for developers in the commercial segment will come down in the future,” says Surendra Hiranandani, Chairman & MD, House of Hiranandani.

According to Sachin Sandhir, Global Managing Director – Emerging Business, RICS, India’s REIT potential is quite large but it has not yet taken off. Bank’s involvement will help the commercial real estate segment by bringing in much needed liquidity. It will set the momentum going for REITs.

There were however few developers who wished for a rate cut in order to give a fillip to the real estate market.

Pratik K. Mehta, MD, Unishire, Bangalore avers, “The status quo on repo rate will be a dampener for real estate. Input costs are rising and margins are shrinking for developers and affordability is being hit for end users who might have to pay higher prices for homes with the increase in raw material cost and unless borrowing costs don’t come down, there will be a challenge for buyers to make the investment. Already the real estate market is affected with the demonetisation effect and sales have slowed down to an all time low and added to the affordability and higher costs, will make it even more difficult for an end user to afford a home.”

Here is how other industry player reacted to the RBI’s move keep repo rate unchanged:

Amit Modi, Director, ABA Corp and Vice President CREDAI Western UP

“It is an expected move taken by the RBI Governor to keep repo rate unchanged as the Reserve Bank of India had reduced the repo rate by 0.25% to 6.25%. In October to signal lower interest rates in the economy. Hence RBI have done their part, the banks on the other hand have not been generous enough to pass on the entire benefit of this reduction to end consumers. Since now the banks are flushed with cash and don’t have to worry about reviving their bottom lines, they should now be passing the benefits of the previous rate cuts to the end consumers. It will be indeed the single biggest factor in kick starting the economic activity in this stagnant phase. Hence we sincerely hope that both Finance Ministry as well as the RBI push all the banks to transfer the entire benefit to the end consumer for whose benefit it is meant; else these moves will severely stop short of benefiting the consumer.”

Manoj Gaur, President CREDAI-NCR & MD, Gaursons India

It is great to see that the Reserve Bank has been so persuasive towards reduced lending rates in the market, specially from the end of Financial Institutions. Increased Reverse Repo rate would mean RBI withdrawing money from the market at a higher rate, hence filling the hands of the banks further. However, it’s on the part of the financial institutions to convert these indirect benefits into something substantial for the end users and promote healthy business environment in the market.

Gaurav Gupta, General Secretary, CREDAI – RNE

A recalibrated MSF standing reduced at 6.5 percent would mean that the overnight borrowing of banks from RBI would come at a lower rate giving a freer hand to banks at lending. However, some direct rate cuts could have been also beneficial in the short term for the realty sector because with the recent data release by RBI which states that HPI has picked up in the last calendar year would have allowed the realty sector to ride on improved sentiments from all corners of the economy.

Vikas Bhasin, MD, Saya Group

Also with global growth indicators showing signs of stronger activity in most of the Advanced Economies and further indicators pointing to a modest improvement in the macroeconomic outlook of the country might have prompted the apex bank to keep a cautious approach towards any major changes in the key rates. However, it was very heartening to see that the RBI has been very accommodative towards reduced lending rates in the market and hence has passed on benefits indirectly to the government allowing them the necessary room to work upon.

Dhiraj Jain, Director, Mahagun Group

In case of a low interest rate environment surrounding the economy and cash available in abundance, the risk of inflation moving up exists. Hence, the RBI doesn’t reduce the rates until it has been fully convinced about the inflation control; as even the inflation had been on a rise for the fifth straight month till February but has taken a downward trend in March which would be kept under strict vigil the next policy review allowing them the necessary cushion to work further on the key rates. Till then, even the financial institutions should also devise ways to offer indirect benefits to borrowers.

Rajesh Goyal, Vice President CREDAI-Western U.P. & MD, RG Group

This is not a surprise move by the RBI as everyone was expecting a stagnant approach towards the key rates. The market has been gaining stability and post the union budget, further ease could have been thought off on the cards. Even though the RBI has not provided any rate cut this time, fresh home loan borrowers should not worry much as they may still witness lowered EMIs because amidst intensifying competition among the lenders, the banks might be forced to start cutting down the interest rates themselves.

Ashudeep Batra ED, Exotica Housing

RBI seems quite focused upon controlling the inflation in country but lowering repo rate could have been a better step for housing sale after assigning industry status to affordable. Again this is indication for banks to bring down interest rate based on earlier repo rate cuts. Home buyers have to wait for lower home loans and ready to move in project will be only option to avoid multiple expenses.

Pawan Jasuja Director FindMyProperty

Unchanged Repo Rate announcement decided to seize on to the repo rate at 6.25 per cent. Realty sector was expecting a additional rate cut at this stage which would have helped in improving market sentiments, This does not seems to bother home buyers much as property prices are under control and banks have already reduced their interest rates upto 8.35% and Govt. Subsidy under PMAY also this will not only help developers initiate more projects at favorable capital but also create wider offerings benefiting home buyers.

Suresh Garg, CMD Nirala World and Secretary CREDAI Western U.P

The sector was looking forward for RBI to reduce the repo-rate by at-least 25 basis points and this could be a big boost for home buyers. The government’s decision in the budget to give industry status to affordable housing has given a huge relief to the sector and reduction in interest rate would have been further icing in the cake in the beginning of the current fiscal. Currently RBI has maintained the status quo but we expect a reduction in next quarter.

Ashwin Sheth, CMD, Sheth Corp

“Although the rate was kept on hold citing risks to inflation from monsoon and GST, but a rate cut at this stage would have helped in lowering the home loan interest rates further after the Maharashtra Government hiking the ready reckoner rates by close to four per cent last week.

This could have made home buying a reality for most buyers who have been eagerly waiting for the rates to cut down. Since demonetisation, banks were flooded with excess liquidity due to a huge surge in deposits by cash holders. However the hike in the reverse repo rate would help to squeeze the excess liquidity and will help bring stability in property prices.”

Navin Makhija, Managing Director, The Wadhwa Group

“The RBI has once again shown uniformity by maintaining status quo with the key lending rate remaining unchanged at 6.25% in its first bi-monthly policy of the fiscal year 2017-18. We expected some reform in the policy. Nonetheless, we support this decision and will adopt a wait and watch approach for now. We hope the RBI takes measures to cut interest rates in the near future to complement the initiatives taken by the Government to ensure stabilisation of the real estate market.”

Rajeev Talwar, Chairman, NAREDCO & CEO, DLF

The first bi monthly Monetary Policy has given a big boost to the launch of REITs as a credible and long term investment alternative in India. The RBI’s decision to allow banks to invest in REITs within the overall umbrella of 20% of their net owned funds is a huge positive. This step now has the potential to usher-in large number of REITs’ listing in India by offering a safe asset class to invest in and also provide competition to foreign institutions. For banks it offers an additional important asset class for investing. For commercial real estate companies, once REITs pick up, it will bring liquidity, and free up capital that will help lower overall costs. We now look forward to detailed norms and guidelines for banks’ investment in REITs by May end.

Source: ET Realty


373 Maharashtra Cities To Fall Under PMAY Scheme




The state of Maharashtra has added 232 cities to the existing 142 which makes it 373 cities under the Pradhan Mantri Awas Yojana Scheme (PMAY).

The officials at the housing department feel that this step will aid the government take up more projects under the PMAY scheme.

Sachin Kulkarni, Builder shared his concerns over the lack of coordination between the department in executing PMAY projects. He said, “This is a good sign. However, the PMO’s seriousness in promoting HFA is diluted by the time it reaches the authorities. Apart from collecting application from interested beneficiaries, nothing has moved on the ground in urban centres. I hope that this initiative moves on fast track”.

Maharashtra CM Devendra Fadnavis recently states that the in order to create more housing stock the state’s Slum Rehabilitation Authority scheme be brought under PMAY so that it can receive the subsidy to create more affordable housing. He clearly mentioned that the government intends to create more housing stock and it was taking various initiatives and making policy changes for it.

Also Read- Affordable Housing To Get A Boost With PMAY’s Scope To Be Extended To Private Lands

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Real Estate Sector May Fall Under GST What Does It Mean For Buyers?




One after the other the real estate sector has witnessed massive policy and law changes in its systems. Nonetheless, the tide has not passed yet. The GST council will take up a proposal to bring it under the uniform nationwide levy.

As the industry is still recovering from the RERA Act, the finance minister, Arun Jaitley said that there is a strong case to include real estate in the new indirect tax regime. He said this last week and also mentioned that GST Council will discuss it in November.

At present, the home buyers are paying 12 percent GST on under-construction properties. This percentage includes two taxes which are stamp duty and registration. The rate of which varies in each state but GST will make them uniform.

Santosh Dalvi, KPMG India partner (indirect tax) said, “If the entire real estate is brought under GST, they would have to abolish the stamp duty and we don’t know how the government plans to compensate the states for their loss.”

The stamp duty with registration and GST comes to approximately 18 percent for under construction properties. He further said, “So, it’s important to look at what rate it will be taxed at. We can then look at consumer prices”.

While agreeing, Bipin Sapra, EY partner (indirect tax), added, “It’s going to be a test for the government”.

Developers also pay taxes on raw materials. However, unlike other businesses, they don’t get any tax refunds through input credit. GST taxes every stage of the business activity to better compliance and compensates for it by permitting refunds.

Anuj Puri, Anarock Property Consultants chairman, said “By including real estate under GST, builders can get a fair amount of input credit, helping bring down costs,” He added that it would make homes cheaper for buyers.

According to Sapra, it will depend on the tax rate applicable.

Niranjan Hiranandani, co-founder of Hiranandani Group said, “Real estate under GST ambit means consumers will only have to pay one final tax.” He stated that with the commencement of RERA it brings transparency and GST would reduce the burden in terms of taxes payable while buying the home. He concluded, “Not only will this create positive sentiment but it should also boost actual sales”.

Also Read: Affordable Housing Is The Changing Face Of Indian Real Estate

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Home Buyers Will Be Covered Against Builders Who Are Going Bankrupt




In a move to protect home buyers from builders declaring their bankruptcy, the Insolvency & Bankruptcy Board of India (IBBI) has amended rules which make it necessary for any company to showcase how they have dealt with interests of all stakeholders. This is directed towards companies like Jaypee Infratech and some of the entities of Amrapali Group.

The regulator has informed about the revised rules last week. This will ensure that banks and other creditors do not get away by protecting their interests at the expense of others who are impacted by the action.  Banks are part of the creditors’ committee. They become an important decision-making body after a company is admitted for bankruptcy.

An expert bankruptcy lawyer said, “The change in the rules has plugged a gap as flat buyers are of the view that there is nothing to protect their interests.”

According to the new law that was enacted last year intends to speed up the resolution process in a period of 180 days, with a possible extension of 90 days. This will be done by appointing insolvency resolution professionals who will take charge of the company’s operations and prepare a plan. As per the law, an information memorandum will be finalized if the creditor’s committee is willing to take applications from other interested companies to take over the company.

The insolvency experts say that the law providing for the plan binds corporate debtor (the company) and its members, employees, guarantors, and creditors, other stakeholders involved in the resolution plan. However, there are no obligations mentioned in the rule to give any treatment to the stakeholders other than the financial creditors (banks) and operational creditors, which includes vendors and others who may have dues.

The National Company Law Tribunal, based on the comfort provided by the revised rules, will choose the final resolution plan based on bids that are received. The lawyer further said, “The tribunal will not clear the resolution plan without giving notice to all stakeholders and the flat buyers can raise objections at that point of time.”

Also Read: Tanvi Group Fail To Deliver Homes And Declare Bankruptcy

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