In a major move that's going to boost the realty/housing sector in India, the country's central bank - Reserve Bank of India (RBI) has announced a cut of 0.25% in the repo rate (from 8%), and a similar cut in CRR (cash reserve ratio) which will allow the banks to possess more funds for the purpose of lending to home buyers.
While Repo Rate is the interest rate at which the central bank lends overnight funds to banks to tide over temporary liquidity deficit, the CRR is the slice of deposits that banks have to park with the RBI.
While the 25 basis points cut in repo rate was expected, the cut in CRR was a bit of a surprise for the industry.
Developers and consultants expect the RBI move would lead to reduction in interest rates for buyers as well as builders. Unitech Builders M.D. Sanjay Chandra was quoted as saying: "This is a small but necessary positive move to boost investment as well as demand in the real estate sector. These growth oriented monetary measures combined with the government's fiscal measures should augur well for the industry in 2013." Welcoming the RBI's announcement, the Confederation of Real Estate Developers Association of India (CREDAI) said that the Repo Rate cut by 25 basis points is "just not enough".
CREDAI National President Lalit Kumar Jain said in a statement: "What we need is creation of a robust supply to curb inflation, for which RBI needs to continue to ease fund supply position, month-on-month and quarter-on-quarter for realty sector." Commenting on the new rates announced by RBI to check slum in realty sector, NAREDCO (National Real Estate Development Council) Director General R.
R. Singh said: "To revive housing industry, there is also a need to bring down the high mortgage rates to improve common man's affordability, which had been hit in past because of high inflation and rocketing interest rates. Hopefully monetary and fiscal policies of 2013 will prove promising for both realtors as well as buyers." Realty consultancy and research firms also welcomed the move. CB Richard Ellis M.D. (South Asia) Anshuman Magazine said: "This reduction in the CRR and Repo rate will bring in some liquidity into the banking sector. This is a positive move and hopefully will reduce interest rates marginally, which will help the real estate industry." Similarly, Cushman and Wakefield Executive MD (South Asia) Sanjay Dutt said: "Backed by relaxation in repo and CRR...and contained inflation, institutions are expected to offer better rate of interest on loans and may also increase deployment in infrastructure and development projects."