With an aim to increase the flow of liquidity in the housing sector, the Reserve Bank of India (RBI) on Thursday decided to provide an additional Rs 5,000 crore to the National Housing Bank (NHB).
"Additional special liquidity facility of Rs 10,000 crore will be provided at the policy repo rate consisting of : Rs 5,000 crore to the National Housing Bank (NHB) to shield the housing sector from liquidity disruptions and augment the flow of finance to the sector through housing finance companies (HFCs); and Rs 5,000 crore to the National Bank for Agriculture and Rural Development (NABARD) to ameliorate the stress being faced by smaller non-bank finance companies (NBFCs) and micro-finance institutions in obtaining access to liquidity," RBI Governor Shaktikanta Das said in his bi-monthly monetary policy statement.
The RBI Monetary Policy Committee (MPC) noted that special refinance facilities for a total amount of Rs 65,000 crore were provided to all India financial institutions (AIFIs) – the National Bank for Agriculture and Rural Development (NABARD).
Real estate sector experts welcomed the move saying that it will aid the sector reeling under liquidity crisis and improve demand.
"The RBI announced several additional measures that will go on to accelerate the economy, enhance liquidity, improve flow of credit and deepen digital payment facilities, among others.
Commendably, its allotment of Rs 5,000 crore each to National Housing Bank and NABARD is a much-needed step for sectors including real estate reeling under the liquidity crisis. It will help infuse capital into the HFCs and eventually provide relief to developers battling liquidity issues in COVID-19 times," said Anuj Puri, Chairman, ANAROCK Property Consultants.
Niranjan Hiranandani, President – Assocham and NAREDCO believes that the move will definitely aid the reeling sector to tide over the liquidity crisis.
He additionally acknowledged the fact accorded by the RBI governor of maximum transmission of rate cut benefits percolating down the banking stream, which shall be reflected in easing the credit supply to meet working capital needs of the industry across the board.
Shishir Baijal, Chairman & Managing Director, Knight Frank India hoped that the measures will provide relief to the real estate sector and help them maintain their status till the economy starts to regain its growth momentum.
"While the sector was looking at a further revision in policy rate, to boost demand, we appreciate the accommodative stance by the RBI, in the wake of high rate of inflation which may have necessitated keeping policy rates unchanged," Baijal said.
On the loan resolution plan, which allows for payment moratorium up to 2 years, for corporate and personal borrowers, Baijal commented that it should provide a breather to stressed real estate developers and individual borrowers in the housing segment alike.
Further, Farshid Cooper, MD, Spenta Corporation said that the additional funding to NHB will help NBFCs and housing finance companies to lend more money to homebuyers and generate demand back in the market.
"This is an encouraging step for the housing sector which has been under immense stress since the lockdown," Cooper added.
With unsold inventories available in major markets, homebuyers should consider buying homes now.
"The regulatory and developmental measures announced today will provide great impetus to the efforts of that all the authorities and government are taking for the Indian economy to regain its strength and return to normalcy," Cooper said.
Calling it a wise move to fuel liquidity, Ram Raheja, Director at S Raheja Realty said that a sentiment upswing will follow among developers and buyers alike given the infusion of additional liquidity to NABARD and National Housing Bank. The MSME loan restructuring will help many companies that are still in distress due to the lockdown, he added.
Manju Yagnik, Vice Chairperson, Nahar Group and Vice President NAREDCO (Maharashtra) believes that ample system liquidity and lower rates are necessary to boost demand and credit offtake.
However, the RBI governor did not deliver an extension in loan moratorium which the industry was expecting.
"An extension in the Loan moratorium would have helped lower and middle-income groups to better manage their finances. Growth recovery in rural areas has been robust as per RBI's estimates, would expect a similar recovery Pan-India,” Yagnik said.
Some industry players highlighted the concerns over subdued loan growth.
"While the RBI has pumped huge amount into the financial system to encourage banks to lend more, yet loan growth has been languishing because of the economy’s slump. The interest rate should be reduced with firm liquidity measures as this is the need of the hour backed by specific fiscal measures to give much-required stimulus to the sector. However, further cut in policy rates would have definitely resulted in the much needed demand booster ahead of the festive season," said Lincoln Bennet Rodrigues, Founder and Chairman, Bennet & Bernard Group.
However, Rahul Grover, CEO, SECCPL feels that the real estate sector will benefit more from complete removal of lockdown as well as restrictions on public transport than from Monetary Policy or other interventions.
"With credit growth already at a low and rate cuts not resulting in credit transmission, the real estate sector hopes that smooth functioning of the economy would be a priority for the Government," Grover said.
Real estate contributes a good chunk to employment of labourers and it's important to keep the economy moving. State Governments should give up on risk aversion and ease lockdown completely by the end of August, he added.
First Published: Aug 6, 2020 2:53 PM IST
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