Holding of rates to decelerate realty growth further, say developers

The RBI today kept repo, CRR rates unchanged

Disappointed with the Reserve Bank holding the key policy rates, property developers say it will put further pressure on real estate sector.

"The easiest thing is to not to change anything but it will increase the difficulties for all sectors including the real estate. When the growth rate is coming down and government and industry is calling for a rate cut they should have cut the rates," said Rajeev Talwar, executive director, DLF Ltd, the country's largest realtor.

Added Lalit Kumar Jain, national president of Confederation of Real Estate Developers Association of India (CREDAI): “It is sad and unfortunate to see RBI taking such a stubborn stand, despite economic realities of the day."

“It will further decelerate the growth in real estate. We wonder if the RBI policy of causing liquidity crunch leading to short supply and resultant price rise is good for the economy or increasing liquidity and pushing supply to bring prices under control is better,” Jain said.

Property developers are facing double whammy of sorts. On one side, property sales are declining and secondly, the borrowing rates of developers have risen 150-200 basis points for them in the last two years.

According to realty research firm PropEquity, the absorption of homes have down by 30% on a yearly basis in September quarter in NCR and 28% in Mumbai metropolitan Region (MMR).

"A quarter point cut could have been better for the industry. It would have given a boost to the sector," said Kamal Khetan, managing director of Sunteck Realty, a Mumbai-based developer.

Anshuman Magazine, chairman & MD, CBRE South Asia added: "We are disappointed that RBI has kept the key policy rates unchanged. We were hoping for some relief in the form of a cut in CRR & Repo Rates as the industry continues to witness hard times given the current situation. We hope the next credit policy decision would consider reduction of CRR which will bring in some liquidity in the banking sector."