Posts Tagged ‘RBI doesn’t grant developers’ wish; stalemate continues in the realty market’

RBI doesn’t grant developers’ wish; stalemate continues in the realty market

RBI doesn’t grant developers’ wish; stalemate continues in the realty market

    Many developers privately admit that they had their eyes set on the quarterly monetary policy, which was announced on Tuesday, July 30, 2013, for a while now as the sector was hoping against hope that the rates would be marginally cut, in order to keep the sentiments bullish. Reports of foreign funds warming up and the substantial contribution of the sector, 6 plus to the Indian GDP, was also being seen as an indication of why the policies would be eased. A section of market watchers also maintained that this, being in all probability, the last policy review by the present governor, as he demits office in September, the chances of the RBI chief granting a wish or two to the business community was high. However, the RBI governor D Subbarao, kept the policy rates unchanged at Tuesday’s quarterly monetary policy review.
    Consequently, the key repo rate remains at 7.25 per cent while the cash reserve ratio remains at four per cent. The pause in the easing cycle of the RBI, set in motion in April 2012, continues. During the past one-and-half years, the RBI has cut rates by 1.25 per cent, to a level of 7.25 per cent.
    The real estate sector, for obvious reasons, is
not amused. Sitting over piles of debt and unsold inventory, they needed some sort of symbolic, if not substantive relief to the buyers to revive the demand in housing. The sector maintains that the apex bank has not been fair to the sector and in order to manage the shortages, they are losing sight of the larger picture of creating surpluses. Even the stock market seems to have disapproved the policy review and the Sensex, in general and the realty index in particular, went into red, following the announcement of the repo rate and CRR remaining unchanged.
    The RBI’s decision follows a careful assessment of the current situation and is in line with the stance taken by it in the last few days, to come down heavily on the speculation in the foreign exchange market. However, the policy review has definitely dented the psyche of average home buyers. Rakesh Arya, a prospective home buyer, feels the rates are too high to think of buying a house now. If it had been reduced, the kind of inventory that is piling up, could have been sold to home seekers who are mostly working class and not investors. Hence, the high rates are pinching at this moment. Realty analysts also maintain that it is not about the cheaper funding to the developers that is the issue, as the developers are anyway procuring funds, with the foreign investors warming up to Indian real estate. The RBI policy and the demand to reduce the interest rate has more to do with the home buyers getting cheaper loans, since inflation has already made them apprehensive of investments with borrowed capital and EMI, over a long period of time.
    The RBI’s concerns though have been taken accepted by a section of real estate developers as well. David Walker, executive director, SARE Homes, admits that the fact that the RBI refrained from increasing the rates, is a positive sign. He however feels that this particular monetary policy was more about liquidity strengthening and arresting the damage being caused by rupee depreciation. “It is important to see if the RBI decides not to increase key policy rates going ahead for the year. If the current account deficit improves and the liquidity measures are rolled back, we are confident that demand will improve in the real estate sector by the end of the year,” says Walker.
    The falling rupee against dollar seems to be driving the RBI policies as of now, instead of falling sales in the real estate business. Hence, the stalemate continues for the sector for some time now and the only hope that the realty fraternity has, is that the new RBI Governor will better understand the concerns of the sector. (The writer is CEO, Track2Realty)

Be the first to comment - What do you think?  Posted by admin - August 3, 2013 at 8:31 am

Categories: Property   Tags:

© 2010