“RBI Governor does not announce any rate cuts, as expected”: Niranjan Hiranandani

MUMBAI, 07 JUNE, 2016: The Reserve Bank of India (RBI) Governor Raghuram Rajan, as expected, maintained a ‘status quo’ during the bi-monthly monetary policy review, 2015-16 on Tuesday, June 7, 2016. The repo rate was unchanged at 6.5 per cent, reverse repo at 6 per cent and CRR at 4 per cent.

During the RBI monetary policy review, the RBI Governor mentioned deposit growth having been strong during April and May, which he said, would ultimately lead to lowering of lending rates by banks.

“Indications were that the RBI Governor would wait for the expected Monsoon rains to actually cover the drought-like situation facing the country, and there would be no changes this time around,” said Niranjan Hiranandani, MD, Hiranandani Communities and Founder-President National Real Estate Development Council (NAREDCO – Maharashtra).

The last rate cut was in April this year, when the RBI Governor cut the repo rate by 25 bps to 6.50 per cent. The CRR was kept unchanged at 4 per cent.

Niranjan Hiranandani said that a rate cut at this point of time would definitely have helped reduce the overall burden for home buyers; and this would have potentially, boosted residential real estate sales. “The economic scenario, the GDP figures as also inflation numbers suggest the possibility of RBI cutting rates by 25 basis points in its next policy review meet in August this year,” he added.

“There is this brouhaha over whether the RBI Governor should be given a second term in the media, and August is Raghuram Rajan’s last bi-monthly review during the present tenure. At times, we see media frenzy over the debate, which to my mind, is uncalled for – the focus on economic indicators seems to be lost in the din that is created. During the policy review, in his inimitable style, the RBI Governor termed it ‘cruel’ on his part ‘to spoil the fun press has been having over my tenure’. And yet, if the expected 25 bps rate cut which is expected in August does not happen,  possibilities are that we may see it happening towards end-2016,” added Niranjan Hiranandani.

“The last time the RBI Governor cut key rates, he expressed hope that banks would pass on the reduction to customers, he does not seem happy with the manner in which banks have done this.,” he added.

Over the past dew months, this translates into a ‘wait and watch’ situation, with the RBI Governor waiting for banks and financial institutions to further transmit the rate reduction to end users, pointed out Niranjan Hiranandani, adding that from an over-all real estate perspective, things are looking better – and he expects 2016 to usher in a time for good news in real estate. “The good news in real estate is that demand for commercial and office spaces is picking up. My Group companies have on-going commercial real estate projects in GIFT City in Ahmedabad, Hiranandani Estate, Thane; and Hiranandani Fortune City in Panvel; and we are handling serious enquiries, most of which are on way to being formalized into actual deals.  I look at these, and have reason to believe that the momentum these will provide will also help elevate residential demand in the vicinity of those commercial properties,” he said.

The RBI Governor Raghuram Rajan’s view has been that banks are yet to fully translate the benefit of repo rate cut to the costumers, Niranjan Hiranandani said, “A section of banks and financial institutions have brought in some levels of reduction in rates, but evidently, this was not as per the RBI Governor’s expectations. I hope that there will be positive moves on part of banks and financial institutions. With the RBI Governor maintaining ‘status quo’ during this policy review meeting, the ball is now in the court of banks and financial institutions,” he concluded.


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