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Monetary Policy Keeps Rates Unchanged

Monetary Policy Keeps Rates Unchanged

Anuj Puri, Chairman – ANAROCK Property Consultants

As expected, the repo rate and the reverse repo rates remained unchanged while maintaining an accommodative stance. With consumer inflation still trending at the upper end of the apex bank’s band, and the policy repo rate also being substantially reduced by 115 basis points since February 2020, RBI kept the rates on hold, with an eye on how the inflation and the economic recovery pans out in the coming months. Advance estimates indicate that the Indian economy may contract as much as 7.7% in FY2020-21 due to the pandemic.

In such a scenario, one would usually expect RBI to cut repo rates in order to boost consumption. Certainly, the real estate industry always aspires for reduced interest rates. Housing demand is reviving, and this demand needs to be fostered. However, the RBI’s current stance is absolutely justified, given the unique circumstances.  We are certain that rates will be adjusted favourably once the pandemic exigencies ease.

In a big positive, extension of DCCO of project loans for commercial real estate is permitted to be extended by a year without downgrading asset classification. This will give major relief to cash-starved developers and will also provide a breather period for maintaining and managing their cash flows.

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