The rate cut of 25 bps to 6% was on expected lines given the low inflation levels in the economy. We had hoped for a 50 bps cut as good monsoons, favorable global environment and new reforms provided the perfect platform to aggressively cut rates. However, it seems that the Governor wants to look closely at the impact of the recent economic policies before trimming rates further.
One of the key points highlighted by the Reserve Bank of India (RBI) included speedier clearance for projects which has been a long standing demand of the industry. We need to remember that deregulation will be the key to the success of various government initiatives in the future. A major impediment to real estate development in India remains the approval process. We are ranked at 185 out of 187 countries by the World Band for Ease of obtaining Construction Permits. It effectively means that we are in the same club as war torn countries where institutions have collapsed and offices which accord approval have been bombed to rubble. The government must look at addressing the shortcomings plaguing the real estate sector at the earliest if it wants to realize the dream of our Prime Minister of “Housing for All by 2022”.
While the demand for real estate in India remains huge, actual consumption has remained sluggish. Given the liquidity situation prevailing in the market post demonetization, there is scope for banks to cut their lending rate further. The amalgamation of lower interest rates coupled with various progressive measures taken by the government will hopefully help buyers ahead of the festive season.