‘RBI likely to cut rates in 2016; this has potential to lower EMI burden of home buyers’: Niranjan Hiranandani

MUMBAI, 27 JANUARY, 2016: As real estate looks forward to the upcoming Union Budget, the scenario in Mumbai and the Mumbai Metropolitan Region (MMR) remains one of optimism. As we come to end-January 2016, real estate in Mumbai and the MMR as also across Maharashtra has witnessed rising sales and positive sentiments from buyers. So, can it be surmised that 2016 holds positivity for real estate? “Logically speaking, trends suggest that 2016 will definitely see better days ahead for real estate,” said Niranjan Hiranandani, Managing Director, Hiranandani Communities.

The Reserve Bank of India (RBI)’s rate cuts during the monetary policy reviews across 2015 were among the major factors that helped create the positive scenario in 2015. For some, it was a surprise that the RBI Governor Raghuram Rajan maintained ‘status quo’ during the Fifth bimonthly monetary policy review, 2015-16 on 01 December, 2015. The multiple rate cuts initiated by the RBI through the year provided some relief to the economy and the real estate sector, and so there was an expectation that he would end the year with another rate cut. Why this did not happen is simple: it is taking some more time for the ‘rate cut’ announcements by the RBI to reflect at the ‘ground level’, said Niranjan Hiranandani. The impact of rate cuts over the year have resulted in stability and improvement in market sentiments in real estate, but the RBI Governor expects banks to do more, and pass on the entire rate cut to home buyers. This happening, in the next fiscal policy review, the expectation is that the RBI will continue to monitor the situation and make necessary adjustments which will boost the economy, he added.

With the RBI being aware that less than half the 125 bps rate reduction this year has been passed onto customers by banks, the RBI Governor has been mentioning the need for banks to ‘do the needful’, and the RBI remains in a ‘wait and watch’ mode – which is why the last monetary policy review in 2015 did not witness any rate cuts. “Another perspective is that RBI Governor, might not have wished to dampen the euphoria of substantial rate cut with a symbolic cut in the last month of 2015. So, any further rate cuts will happen after the RBI Governor sees banks passing on benefits to home loan takers,” added Niranjan Hiranandani.

Market trends suggest that a major interest rate cut with potential to increase sales of residential real estate may be on the cards in 2016. This will definitely have the potential to boost off-take of residential real estate in 2016, said Niranjan Hiranandani. “If this does happen, 2016 may witness the sort of rate cut which would result in real change, effectively lowering the EMI burden of homebuyers. The RBI Governor has already put subtle pressure on the banks to pass the benefits of previous rate cut onto homebuyers, and this happening, things will be set for a ‘major rate cut’ in 2016 – which will make 2016 truly, a ‘Happy New Year’,” he concluded.


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