RBI's Decision to Maintain Policy Rates Disappoints Real Estate Sector
The Reserve Bank of India's (RBI) decision to leave key policy rates unchanged has drawn criticism from real estate builders, who had anticipated a reduction in borrowing costs. The RBI, however, maintains that this is the appropriate time to hold steady.
While the central bank had previously indicated it might be the right time to lower borrowing costs for both developers and homebuyers, the recent announcement contradicts this stance.
CREDAI Expresses Disappointment
The Confederation of Real Estate Developers' Associations of India (CREDAI) has voiced strong disapproval of the RBI's decision. CREDAI President Lalit Kumar Jain characterized the decision as an entirely negative approach towards the real estate sector.
"Mr. Jain pointing to the difficulties in raising high level funds for real estate constructions requested the central bank to have a softer policy. He further added of the necessity of reduction in interest rate."
Given that real estate is the second largest employer in India and contributes significantly to the GDP, with approximately 400 other industries relying on its growth, CREDAI's concerns carry weight.
Hope from Finance Ministry
A recent meeting between CREDAI and Finance Ministry officials has provided a glimmer of hope. CREDAI President Jain expressed optimism that the government would introduce "pragmatic policy" to support the sector. He conveyed that developers are counting on such favorable policies.
CBRE Shares Similar Concerns
Real estate consultancy firm CBRE echoed CREDAI's sentiments. CBRE South Asia Chairman and Managing Director Anshuman Magazine stated that the RBI's decision to maintain status quo on key policy rates is a setback for real estate. He also expressed his disappointment with the announcement.
"Mr. Magazine further highlighted that cut short of the repo rate should have attracted more investors. He opined that the cut of 25 base points in the CRR rate also invites some sort of liquidity."
Impact on Real Estate Builders
In essence, the RBI's decision is expected to adversely affect developers, making securing initial funding for projects particularly challenging. Despite this setback, the sector maintains hope that the government will implement supportive policies to mitigate the negative impacts of the RBI's decision.