Real estate industry says RBI rate cut to boost housing demand by buyers

Jan 29 2013, 18:52 IST
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Real estate industry says RBI rate cut to boost housing demand by buyers Real estate industry says RBI rate cut to boost housing demand by buyers
SummaryReal estate industry and property consultants today hailed the RBI's decision.

Real estate industry and property consultants today hailed the RBI's decision to cut key policy rates, saying that it is a positive step that would boost housing demand and encourage foreign investment in the sector.

The RBI today cut short-term lending rate, called repo, by 0.25 per cent to 7.75 per cent and Cash Reserve Ratio (CRR) by a similar margin to 4 per cent, releasing Rs 18,000 crore primary liquidity into the system.

Developers and consultants expect the move would lead to reduction in interest rates for buyers as well as builders.

Commenting on the development, Unitech Managing Director Sanjay Chandra said: "This is a small but necessary positive move to boost investment as well as demand in the real estate sector. These growth oriented monetary measures combined with the government's fiscal measures should augur well for the industry in 2013."

Global realty consultant Jones Lang LaSalle (JLL) India said the RBI has shown commitment to improve liquidity in a cash-strapped economy by reducing the policy rates.

RBI rate cut: FE's Sunil Jain explains

"The RBI has taken a huge positive step by announcing the above policy measures. There should be a revival in investment and growth, including in the real estate space...RBI's policy is definitely a key to boosting real estate market sentiment and sending out positive signals to global investors," JLL India Managing Director (Capital Markets) Shobhit Agarwal said.

Confederation of Real Estate Developers Associations of India (CREDAI), the apex body for realty firms, welcomed the decision, but felt that the repo rate cut by 25 basis points is "just not enough".

RBI rate cut: FE's Sunil Jain explains

"What we need is creation of a robust supply to curb inflation, for which RBI needs to continue to ease fund supply position, month-on-month and quarter-on-quarter for realty sector," CREDAI National President Lalit Kumar Jain said.

National Real Estate Development Council (NAREDCO) said infusion of additional funds will trigger businesses for real estate and around 300 affiliate sectors and lift the declining IIP figures.

"To revive housing industry, there is also a need to bring down the high mortgage rates to improve common man's affordability, which had been hit in past because of high inflation and rocketing interest rates. Hopefully monetary and fiscal policies of 2013 will prove promising for both realtors as well as buyers," NAREDCO Director General R R Singh said.

Realty consultant Cushman & Wakefield (C&W) said the central bank has been keen on keeping inflationary pressures under control, which had led to stringent moves from the RBI over the past nine months.

"Backed by relaxation in repo and CRR...and contained inflation, institutions are expected to offer better rate of interest on loans and may also increase deployment in infrastructure and development projects," C&W Executive MD (South Asia) Sanjay Dutt said.

CBRE South Asia Chairman and MD Anshuman Magazine said: "This reduction in the CRR and Repo rate will bring in some liquidity into the banking sector. This is a positive move and hopefully will reduce interest rates marginally, which will help the real estate industry."

The industry expects more such steps to improve liquidity and reduce interest rates to increase investments, he added.

Raheja Developers Director Manoj Goyal said with the reduction of CRR and repo rate, the developer community now expects banks to pass on the advantage to end-users.

Knight Frank India's Chairman Pranab Datta hoped today's decision is the start of a series of rate cuts to be followed over several quarters in future.

"The consequential drop in home loan rates will greatly benefit consumers and stimulate demand for new housing.

Considering the sharp drop in housing demand, a 50 basis point reduction would obviously have been more desirable and would have also sent a powerful signal towards a more facilitative environment," he added.

Assotech Managing Director Sanjeev Srivastva said the much awaited relief, although small in percentage, is going to decide the trend in the coming months.

Royal Institution of Chartered Surveyors (RICS) South Asia Advisor S Sridhar termed the RBI's action as being on expected lines and an overall sentiment-lifter.

CHD Developers Managing Director Gaurav Mittal said: "We are happy that RBI has taken cognizance of the plight of the sector by lowering CRR and repo rate. Home loans may get cheaper facilitating the buying decision of the consumers."

M3M India Director Pankaj Bansal said the developers hope that the government will, in the forthcoming Budget, will take measures such as giving infrastructure status to the sector, allowing ECB for high-end housing and increasing tax rebate on housing loans.

Ramprastha Chief Executive Officer Nikhil Jain said the move will stir more liquidity, providing a slight breather for the real-estate sector, which has started to stabilise from the toll of the inflation.

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