RBI Monetary Policy: What's In for Real Estate Sector, Consumers?
While the decision to keep the repo rate untouched at 4 per cent and the reverse repo rate at 3.35 per cent in the backdrop of increase in retail consumer prices was on expected lines, say experts who closely track the banking and finance domain. However, the decision to infuse a total of Rs 10,000 crore to the National Housing Bank (NHB) and NABARD is seen as a big positive for the sectors like real estate that has been witnessing liquidity crunch for a while.
Commenting on the infusion of Rs 5,000 crore into NHB, Anuj Puri, Chairman – ANAROCK Property Consultants says: "It will help infuse capital into the Housing Finance Companies and eventually provide relief to developers battling liquidity issues in COVID-19 times." On keep the repo rate unchanged, Puri says, "The RBI was expected to do all it can to keep the inflation rates reined in for the duration."
Ramesh Nair, CEO and Country Head (India), JLL welcomed the move to infuse liquidity into NHB to protect the housing sectors from liquidity challenges. "RBI has also allowed stressed MSME borrowers to restructure debt if their loans were classified as standard as on March 1st 2020. These measures will continue to play a significant role to tide the short-term challenges faced by the corporate sector and will give them a breather to focus on restarting their business operations. However, one-time restructuring of loan would have given the much needed respite to the real estate sector which has been facing headwinds due to the pandemic," Nair adds.
Piyush Gupta, Managing Director, Capital Markets & Investment Services at Colliers International India says, “Allowing one restructuring of corporate loans is a significant policy decision and would help banking and corporate sector to navigate through impact of Covid-19 on business cash flows. Interest rates have remained unchanged however, home loan rates have been on a downward trend and given respite to the home buyers in past few months.”
The decision to allow one-time restructuring of loans by RBI is a great news for the real estate industry, says Bhushan Nemlekar - Director, Sumit Woods. "This will certainly help a lot of developers to complete their projects on time and a lot of buyers to get their homes soon," he adds. Sumit Woods is a listed construction company that undertakes slum rehabilitation and redevelopment projects and construction of eco-friendly houses.
In the run-up to the policy announcement leading developer Niranjan Hiranandani, who is also the President of ASSOCHAM had Tweeted: "Govt steps to ease liquidity issues is still inadequate to meet working capital needs. So Factoring and discounting of bills might help to solve issue. We can bring back traditional lending methods to see private funding for factoring can also take place".
On the decision to allow up to 90 per cent lending against gold, Kaushal Agarwal - Chairman, The Guardians Real Estate Advisory says: "The 90 per cent lending against gold will make it easier for the middle class to avail liquidity."
Agarwal says that 'it is important now for the RBI to further reduce the reverse repo to help banks lend further and let go of the cautious approach that has been adopted currently'. What impressed Agarwal was the formation of an expert committee by the RBI. "Importantly, the move to form an expert committee to examine the one-time restructuring of loans will significantly help borrowers mitigate the impact of COVID-19 and the subsequent lockdown," he says.
Kuntal Sur, Partner and Financial Risk and Regulation Leader, PwC India says, "RBI is setting up an expert committee headed by KV Kamath for corporate and personal loans resolution plans, which will look into sector specific financial parameters for restructurings. The committee also changed the weightage of Priority Sector Lending (PSL) in favor of neglected districts and good news for startups and renewable energy sector as these are brought under PSL."
According to Sujan Hajra, Chief Economist and Executive Director, Anand Rathi Shares & Stock Brokers, the policy delivers support to a large range of sectors including NBFCs, HFCs, corporate debt market, debt MF, agriculture and backward districts (for priority sector loans). "Increase in LTV for gold loans is another significant step. We expect the RBI to cut repo rate by further 50 bps in FY21 but it may come once the lock-down restrictions are fully removed and inflation actually comes down. For banks, the measures rolled out today would improve earnings (loan restructuring-led lesser near-term provisioning) but the regulatory forbearance (debt restructuring, higher LTV on gold loans) can lead to lower valuation multiples in the medium-term,” says Hajra.
_20240521145225original_image_12.webp)
