Realty developers disappointed at holding of rates

Last Updated: Wed, Oct 31, 2012 03:15 hrs
A man walks past an RBI logo in front of its building in Kolkata

Real estate developers, hoping the central bank would cut lending rates, say they are disappointed with the Reserve Bank.

In on Tuesday's policy announcement, RBI cut banks' Cash Reserve Ratio by 25 basis points (bps), while keeping the key rates unchanged.

"We needed a cut...So much of stock is lying unoccupied. It (rate cut) will spur the housing segment," said Rajeev Talwar, group executive director, DLF. Added Lalit Kumar Jain, president of the Confederation of Real Estate Developers' Associations of India: "The cost of funding of real estate is very high and home buyers, as well as developers, expect RBI to come out with a positive policy and facilitate drastic reduction in interest rates."

Compared to the corresponding period last year, homes sales have declined 30-50 per cent in many parts of Mumbai and the National Capital Region, due to high prices and interest rates, say property consultants. Developers' cost of borrowing have risen 150-200 bps in two years, pushing up their overall cost.

According to RBI, housing prices rose 6.7 per cent across the country in the first quarter of this financial year.

"Obviously, inflation is a major concern of RBI. But keeping rates high does not seem to be working, given that the year-on-year wholesale price index-based inflation rate for August was 7.5 per cent and for September it had increased to 7.8 per cent. RBI now needs to think in line with the government's policy and encourage investment on the supply side as a tool for containing inflation," said Niranjan Hiranandani, president, Indian Merchants Chamber.

Pujit Aggarwal, managing director of Orbit Corporation, said housing prices and lending rates were not related. "The finance minister is saying bring external commercial borrowing in real estate so that projects get low-cost finance. Supply of new projects should be increased so that prices will come down," he said.

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