Track2Realty-Agencies: Realty firms and property consultants have expressed disappointment over RBI’s decision to keep key policy rate unchanged and said it was the right time to bring down the borrowing cost for home buyers as well as developers.
“CREDAI has expressed strong disappointment at the RBI’s latest credit policy. The Central Bank should shed its negative approach towards the real estate industry,” the apex realtors’ body said in a statement.
Stating that the cost of funding for real estate is very high, CREDAI President Lalit Kumar Jain says the RBI should come out with a positive policy and facilitate reduction in interest rate.
“We have been pointing out that the real estate industry is not only the 2nd largest employer in the country but also contributes handsomely to the GDP and growth of 400 other industries,” he adds.
After the recent meetings with Finance Ministry officials, CREDAI had been hopeful that the government and the RBI would come out with “pragmatic policy”, Jain says.
Echoing similar views, CBRE South Asia Chairman and Managing Director Anshuman Magazine says, “The RBI’s decision to keep the key policy rates unchanged once again is a disappointment for the real estate sector”.
“While a cut of 25 base points in the CRR rate does infuse some liquidity, a reduction in the repo rate would have helped boost investor sentiment. The festive season coupled with an expected change in policy rates would have been the ideal time for improving consumer confidence,” Magazine said. Battling with low sales and high capital costs, real estate developers are disappointed over holding of rates by the central bank.
The Reserve Bank of India cut cash reserve ratio by 25 basis points while keeping the key rates unchanged.
Rate Sensitive BSE realty index went down 2.28 percent, led by property developer DLF which fell 2.2 percent. Indiabulls Real Estate plunged 4.06 percent, while Unitech fell by 3.11 percent, and D B Realty by 2.53 percent.
Simon Rubinsohn, RICS Chief Economist, says the decision of the RBI to leave on hold the repo rate at its latest policy meeting was not entirely unexpected given the on-going concerns surrounding the inflation picture. The rise in the WPI measure to a 10 month high in September of 7.8% coupled with elevated household inflation expectations, which currently stand at 12% for the next year, provided the justification for the cautious stand of the authorities. However, it is significant that the RBI still took the decision to lower the cash reserve ratio by a further quarter point.
“The importance of this move, although relatively modest, should not be overlooked as it will have a direct bearing on borrowing rates and the capacity of the banking sector to lend. That said, it is unlikely to be sufficient to reverse the course of the economy in the near term. More likely, pressure will build on the authorities to take further action in the early part of 2013 particularly if there are signs both that the inflation dynamic is improving and the recent plan outlined by Finance Minister Chidambaram to address the country’s large budget deficit is a runner,” says Rubinsohn.
According to Rajeev Talwar, Executive Director, DLF Ltd the CRR cut will only fuel inflationary tendencies in the system and not cutting of the rates.
Paras Gundecha, President of MCHI-CREDAI says the government and the central bank should facilitate lower interest rates. Many home seekers have been waiting on the fence and the RBI must help improve the market sentiment.”
“We want RBI to do more,” he added.The cost of all inputs is very high and hence the RBI should help bring down the interest rates, Mr Gundecha says.
