Comment: Pradeep Jain

Rate hike will intensify realtors' cash crunch

The 50-basis-point rise in repo and reverse repo rates by the Reserve Bank of India (RBI), bringing these to 7.25 per cent and 6.25 per cent, respectively, is harsh and will intensify the cash crunch faced by the real estate sector. The move to increase the savings bank deposit rate to four per cent will put pressure on the cost of funds for banks. RBI must think about the industrial growth which has moderated in the last few quarters. Taking funds out of the market cannot be the only solution to tame inflation. The pressure on prices is global and reflects supply-side bottlenecks. The solution is not monetary tightening. This step by RBI will further hit the industry’s demand-supply matrix. Real estate is a sentiment-driven industry and any punch on the sentiments of buyers can bring a halt to growth. I appeal to RBI to restrict rising prices which threaten to derail growth, but not at the cost of flow of funds.

Pradeep Jain Chairman, Parsvnath Developers