RBI better known as Reserve Bank of India has many reforms and monetary policies which impact the industry and other sectors in good and bad ways. With the current GDP, India is set to be at the lowest in the last few decades which is a cause of concern. The monetary policy has been revised by RBI keeping in mind the slow GDP. Also, the REPO rate has been decided to reduce by 25 points and is currently at 7.5%. This will make a great impact in the real estate industry as the banks will now able to provide home loans at an attractive rate. This impact will make the current customers get better rates on home loan interests and retain them from being attrition.
The real estate developers will get a relief from such an impact as this will help move the stock faster and give a relief to the builders. RBI has seen a huge inflow of money with the demonetization. A total of 5.12 lakh Crore has been deposited into the banks and only 1.3 lakh Crore which is one-fifth of the total deposits have been withdrawn. With this, the RBI has asked banks to park around 4 lakh Crore in the reverse repo facility. This is a temporary mechanism that has been an action by the RBI and it will impact an outflow from savings bank account return rates. Therefore the rate cut will balance the actions taken by RBI.
RBI has been directly impacting the real estate industry with its monetary policy and has passed on the benefits to the buyers of the real estate sector. The demand for housing is on an ever increasing trend and this is also being met by the developers. However, with the REPO rate unchanged it has put on hold the new investors to invest in the housing sector. The spending power of the consumer depends on the home loan rate cuts which make the EMIs lesser and gives a relief to the investor to invest more. But since the rates have not been reduced as expected the EMIs have not changed much making the buyers stay where they are.
This has impacted the low and mid income range consumers to wait for the rates to go down and only then invest in the real estate sector. Despite the requirement, the consumers are waiting for a rate revision either from the RBI or the developers. But the developers may not be able to do so as the action is not supported by the RBI and is not monetising with the current situation. All these money matter impacts the end consumer in different ways. The money saved from real estate will end up in the stock market as this sector is the most lucrative after the real estate industry. The profits from the stock market are then moved into the real estate and the cycle goes on. The impact from the REPO rate has caused a lot of grief in the real estate sector and the developers bear the brunt of their stocks not moving as expected.
Every monetary policy has something to offer and impacts some or the other sector each time. Banks are now able to give away the benefits to the customers and hep them to invest in better options. The savings interest rates have also become better as the industry cashes in on the changes in the RBI monetary policies and reforms. This change has also impacted the foreign markets from their investment in real estate.
The monetary policy made a lot of changes in the investment decisions and the stock market lost its indices by 1%. This was because the money invested in the stock market was now turning their heads to the real estate sector and making way for the developers. It has also led to the liquidity rate being on an all time high with investors now spending on the other sectors.
RBI has been the talk of the town with the monetary policy changes and has made many investors rethink on their strategies and develop new ones. It has caused a lot of ups and downs in the market. However, this is good for some while bad for the others.
