RBI maintains status quo on policy rates, real estate sector welcomes additional measures to boost home loan lending
“RBI is clearly looking through inflation giving more priority to growth, bearing in mind that inflation is led by supply chain disruptions. India’s GDP contracted by 23.9 percent in the April-June quarter of 2020. But the future quarters are expected to be better with the RBI forecasting GDP to contract by 9.5% in FY 2021. Importantly, the Central Bank believes that GDP growth may turn positive by the fourth quarter.
The headline inflation rate was recorded at 6.7 percent during April-July 2020 due to strong supply-chain disruptions. This is above the outer limit of RBI’s medium-term inflation target 6%. The Central bank continues to maintain its accommodative stance to allow elbow room for further policy interventions if required. Thus, the repo rates remained unchanged at 4%. So far, the RBI has slashed rates by 115 basis points this year to support the economy and real estate sector in particular, amid the COVID-19 pandemic.
RBI has rationalized risk weights for all new home loans which will be availed until 31st March 2022. Unlike the existing system where it was linked to both size of the home loan and loan to value (LTV), it will now be linked to only LTV of home loans. This is timely and a step in the right direction and is expected to provide a fillip to housing loans, thus having a positive impact on the residential sector.”