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Friday, March 27, 2020

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Purposeful action to mitigate the adverse macroeconomic impact of the pandemic : Ramesh Nair, JLL India


Purposeful action to mitigate the adverse macroeconomic impact of the pandemic : Ramesh Nair, JLL India

Appended below JLL India Cmmentary on RBI Rapo Rate attributed to Mr. Ramesh Nair is the CEO & Country Head of JLL India for your perusal.

Purposeful action to mitigate the adverse macroeconomic impact of the pandemic


This is a very significant move with substantial monetary policy intervention at a time when COVID -19 has impacted the economy at large.
This is in conjunction with economic package announced by the finance minister yesterday for the poor.

In addition to other benefits, the package is expected to benefit 3.5 crore registered construction workers.
Ramesh Nair,
 CEO & Country Head,
 JLL India

This is also a perfect orchestration of the joint efforts by the Central government, State governments and the Central Bank to deal with this global health crisis.

In these unprecedented times, the 0.75% rate cut (bringing down current the repo rate to 4.4%) combined with a reduction of 0.9% in reverse repo rate and other measures to infuse liquidity into the system is a welcome move.

The repo rate reduction has even breached the 2009 level mark when the economy was hit by the global financial crisis and the policy rate fell to 4.75%.

This is to ensure revival of growth, mitigate impact of covid19 while containing inflation. The reduction in reverse repo rate will encourage banks to resort to enhanced lending to productive sectors of the economy at a time when growth of credit is slowing down. It shows the central bank’s willingness to use all the instruments at their disposal to mitigate the impact of a global pandemic on the functioning and the stability of the Indian economy and the financial sector .

The injected liquidity of 3.74 lakh crores along with the 3-month moratorium on all term loans by financial institutions will alleviate short-term liquidity concerns and help developers as well as home buyers  survive in these uncertain times. It is a big relief for developers and homebuyers to help them mitigate the challenges faced by them currently.

It is pertinent to note that total outstanding loans of real estate developers from Commercial banks, NBFC s and HFCs is estimated to be around Rs. 4.5 lakh crore as of March 2020. At the same time, this moratorium will definitely benefit homebuyers as these financial institutions have lent an estimated INR 20 lakh core as of March 2020.

It is important for immediate transmission of these rate cuts to the home buyer which will boost consumer sentiment. The state governments should also take necessary steps to utilise the cumulative Rs. 31,000 crore funds for the welfare of building & construction labourers to help those who are severely impacted by the economic disruption on the back of the lockdown.



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