Real estate industry says rate cut to boost housing demand

Realty developers and property consultants today hailed the Reserve Bank'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 Reserve Bank of India (RBI) today cut short-term lending rate, called repo rate, 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 RBI has shown commitment to improve liquidity in a cash-strapped economy by reducing the policy rates.

"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."

"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 apex bank 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," Cushman & Wakefield executive MD (South Asia) Sanjay Dutt said.