Central Bank Treads Cautiously by Maintaining A Status Quo On The Credit Policy

Against the expectations of the market, the Reserve Bank of India kept the repo rate and the cash reserve ratio unchanged at 8% and 4.75% respectively in its recent credit policy. The real estate sector was hoping for a boost from the government in the form of some relief in the benchmark rates to ease the liquidity and fuel the sector’s growth. But with the stance taken by the RBI, experts feel that the country’s apex bank could have done better on monitoring the issues facing the economy.
Expressing his disappointment, Paras Gundecha, President of MCHI-CREDAI, states, “It seems the RBI is undermining the importance of the real estate sector in India’s economy and GDP. The real estate sector plays a vital role in generating employment opportunities and accelerating the growth of the nation. Being the financial hub of the country, the real estate sector in Mumbai will be negatively impacted by the RBI’s status quo.”
Inflationary pressures and a policy logjam have impacted the momentum of the real estate sector, which was hoping for the government to announce some measures to support the sector.
According to Lalit Kumar Jain, National President, CREDAI and CMD of Kumar Urban Development Ltd (KUL), the status quo on interest rates will further dampen the sentiment though the RBI may justify its action. He says, “The RBI appears to be sadly ignorant of the importance of the real estate sector in the national economy and GDP. The capital and labour intensive sector plays a key role in employment generation and accelerating growth.”
He recalls that the encouragement given to real estate in 1998 had kick-started the growth of cement and steel industries along with over 165 other industries, including transport, with no additional cost incurred by the government.
Similarly, Shailesh Puranik, MD, Puranik Builders Pvt Ltd, says, “We are hopeful of some positive steps by the RBI in the future to strengthen the overall market sentiments in the real estate sector.” Pranab Datta, Vice-Chairman and Managing Director, Knight Frank India, says, “The May inflation data seems to have prompted the RBI to adopt a cautious approach and maintain status quo, despite allround expectations of easing liquidity and lowering interest rates. For the realty industry, battling sluggish conditions for quite some time, the decision means that the hostile environment will extend further and preempt any respite to the industry stakeholders.”
The main concern for both buyers and developers is related to the inflationary trends that still persist in the economy, as their finances get impacted on a much bigger level. Explaining his view point, Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield, shares, “From the point of the real estate sector, a further rate cut would have resulted in positively influencing the sentiments within the sector. However, our outlook for the sector remains cautious, but still positive as there are transactions still taking place at a sustainable pace and volume.
Source- TOI

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