Realtors gladly have welcomed the Reserve Bank of India’s decision to deduction in Cash Reserve Ratio (CRR) will help to get better the liquidity position of all sectors including realty sector, as well as cited that interest rates should be reduced to shoot up the housing demand.
The cut in CRR will bring in liquidity, which will help to falling real estate sector.
In its 3rd Q review of the monetary policy RBI has injected Rs 32,000 crore into the system by lowering the CRR by 50 basis point.
Pradeep Jain, Chairman, Parsvnath Developers Limited and Chairman, Confederation of Real Estate Developers’ Association of India (CREDAI) said that, “RBI, in its Credit Policy Review has attempted to do a delicate balancing act between the need for growth and urgency of containing price line. In the end it has acted with caution by keeping all rates unchanged and just by reducing Cash Reserve Ratio (CRR) by 50 bps. The tokenism has seen release of Rs 32000 crore for the banking sector to lend. After the negative impact created by thirteen continuous rate hikes, this will prove insufficient to boost the growth. “
That the economic growth has been reined in is clear enough with RBI too reducing the target growth rate. But more critical for the productive sector is consumption of funds by the government sector leaving private investment short of liquidity. In last one and half year the investments have drastically shifted towards public sector which has impacted the private players very badly. Hopefully the Union Budget will correct the aberration and help RBI ease monetary policy. Only then growth will receive the relevant support, Jain said.
For real estate sector in particular, this will serve as a signal that interest rates will now ease. Buyers may opt for floating rate loans at this juncture since the signal is clear. Also the rising input cost will not leave any space for reduction of price. Buyers are expected to take the signal. We only hope that the forthcoming Union Budget will leave RBI room to address the issue of easing monetary policy aggressively, he added.
Echoing the view Gaurav Mittal, Managing Director, CHD Developers Ltd. Member, Governing Council, CREDAI, “We are happy that RBI has taken cognizance of the plight of the productive sector and has lowered the CRR by 50 bps.”
This move will help curb to some extent the negative sentiments in the economy in general and real estate sector in particular. The policy actions are expected to improve liquidity in the system and anchor medium-term inflation expectations, Mittal said.
However this is just an indication that the sequence of rate rise is now behind us. What we will need now consolidation of government finances so that funds are available for the private sector. However the signal will serve as a boost for the real estate sector with sentiments of buyers turning favorable. This move is set to help stimulate growth. We thank Reserve Bank of India for realizing the need of the hour and taking the right decision by not hiking the rates, he added.
Manoj Paliwal, CFO, Omkar Realtors & Developers on Monetary policy also expressed his view on the CRR cut says, “0.50% reduction in CRR announced by RBI is a step in right direction although too less and a bit late. We do not foresee any immediate impact on the interest rate which is disappointing as Real Estate is top notch priority for the common man. Therefore, liquidity for real estate companies will improve only after other sectors have got sufficient funding.”
Posted: 25 Jan 2012 04:24 AM PSTBy Accommodation Times