This Article is From Aug 20, 2015

Property Prices Must Fall, Raghuram Rajan Tells Developers

Property Prices Must Fall, Raghuram Rajan Tells Developers

RBI Governor Raghuram Rajan and State Bank of India chairperson Arundhati Bhattacharya at the second SBI Banking and Economic Conclave (PTI)

Reserve Bank Governor Raghuram Rajan on Thursday made a case for reduction in property prices given the high inventory of unsold flats across the country.

"If real estate developers, who are sitting on unsold stocks, start bringing down prices, that will be a big help to the sector because once there is a sense that the prices have stabilized more people will be willing to buy," Dr Rajan said. (Watch)

I thing we need the market to clear and with growing unsold stock we need to figure out ways to do it," he added.

The Governor said banks should explore ways to make home loans easier, but quickly added that property prices must fall before rates are brought lower.

"We don't want to create a situation where prices remain high at a level that demand may not pick up to the extent necessary," Dr Rajan said.

His comments come at a time when the realty sector is struggling with low demand and rising inventory of unsold flats. Property prices in some cities have witnessed small corrections, but analysts say there's further scope for decline in property prices.

Analysts have also cited high interest rates as a big factor for the slump in property sales.
The RBI Governor was speaking with State Bank of India boss Arundhati Bhattacharya at an interactive session in Mumbai.