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Realty sector's hopes are high from RBI's MPC

Posted On: 2020-12-03 07:12:50 (Time Zone: Arizona, USA)

As the RBI's Monetary Policy Meeting is in progress, the real estate sector is hoping to get some relief that could help them in these challenging times and also measures that can help in sustaining demand, especially after COVID-19 scenario. Though experts are saying the repo rates might not change, the hopes are high as in the recent months the Apex bank has taken steps necessary to uplift the sector.

Last month, the central bank rationalized the risk-weight norms and linked home loans with loan-to-value (LTV) ratios only for all new housing loans sanctioned up to March 31, 2022. Earlier, the risk weight percentage was decided by the size of the loan and the LTV ratio. While acknowledging the criticality of real estate in the economic recovery process, the RBI said home loans have a risk weightage of 35% in case the LTV is of up to 80%. The risk weightage will be 50% if the LTV is over 80%, the banking regulator said.

Talking about the need for further steps, Dhruv Agarwala, Group CEO,, &, says, "The RBI has announced several favourable measures this year for the real estate sector; however, more needs to be done such as the decision on Input Tax Credit. The sector will obviously benefit from a further reduction in home loan interest rates but we feel that there is hardly any scope for a further rate cut this year. The sector should try to take advantage of the opportunities arising out of the decisions taken by the RBI over the past few months."

Maintaining that rationalization of the risk weightage to LTV for all new housing loans was supposed to bring in more credit Yash Miglani, MD Migsun Group says, "The need is that RBI should ensure that the announcement should get immediately. The sector has yet to see the major impact of the announcements. We hope the individual banks will take necessary steps and keep the real estate sector in their priority lending list. In the last few months, the government and the RBI took decisions intended to move towards the path of economic recovery, and real estate is looking for packages that can help them speed up the pace."

The sector is already optimistic because of the increased buyer interest in real estate assets. "The developer community is all charged up to contribute towards the economic growth of the country. We hope the RBI will take more steps to ease out the burden on the real estate sector, which will further improve the economic condition," says Ashish Bhutani, MD, Bhutani Infra.

Developers also feel that the RBI should announce some measures that can help attract buyers towards the real estate sector. "Steps are needed that will bring in positivity to the sector. The buyers should get more loan, especially the ones interested in high-value purchases that will help in revival of some segments," says Amit Jain, Director, Mahagun Group.

One of the measures applauded by the realtors was the decision of the RBI to consider loan restructuring based on the projects and not on the company. "We are looking for steps that will further improve optimism in the market, which is already upbeat with buyers and investors flocking the project sites to book a real estate asset. In recent past, multiple decisions were taken by the RBI to improve the health of the real estate sector, and as a developer, we welcome it wholeheartedly and expect that more is in the pipeline," says Dhiraj Bora, Marketing Head , Paramount Group.

Saying that loan restructuring will help many of the stuck projects and commenting on the impact of RBI's steps, Ashok Gupta, CMD Ajnara India says, "The demand is already potent, and with road laid out for more projects to come up, the buyers will have more options to choose from. Not only developers but buyers also got gifts from the RBI in the form of low home loan interest rates and loans being linked to loan to value only. All these measures are going to have a positive impact on the overall health of the sector. Now, we feel that a call needs to be taken on Input Tax Credit and bringing down the cost of raw material apart from helping the sector get more liquidity."

In conclusion, Rajat Goel, JMD MRG World says, "Real estate has been going through a challenging phase. Last financial year too, the situation was not good for the first nine months, and it got worse with the onslaught of the global pandemic. It has become difficult for many developers to manage cash flow to meet the requirements of construction, salaries, vendor payment, and then at the same time, they have the loan obligations. The overall sentiment needs a boost, and with adequate steps from the RBI, the confidence in the sector will be back."

Source: Equity Bulls

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