CRR cut: Realty players seek rate cut

NEW DELHI: Reeling under high interest rate regime for the last few months, the Indian real estate industry has seen some positive movement in Reserve Bank of India (RBI)'s latest move to  revise  the Cash Reserve Ratio (CRR) by 50 basis point, but industry sources said lending institutions should follow suit by cutting the interest rate immediately to win back home buyers.

Aditya Verma, Senior Vice President & COO of Makaan.com opined, "CRR cut from RBI is a welcome step and is viewed by the industry as an early indicator for a softening stance in the coming months. The step will easy the liquidity in the system which is good for the real estate industry. Major benefit will actually accrue only when there is softening of the repo and reverse repo. This is expected over Feb-March 2012 period. The actual benefit to the property seekers will start to flow from April 2012 onwards."

India real estateReal estate major DLF also had positive take on the CRR cut. "While this is the first positive step after a long time, it is really not adequate to give a fillip to growth," Rajeev Talwar, group executive director of DLF, said. "All I can say now is that this is a positive signal. We have been reeling under a high interest rate regime and essentially there has been a crisis of confidence due to successive rate hikes."

Talwar told ET that that housing and construction industry was largely buyer-funded and thus rates need to come down to get them back to the market. "With every rise in sentiment, you get a great boost to demand."

Confederation of Real Estate Developers' Associations of India (CREDAI) also welcomed the move. "We are happy that the RBI has taken cognizance of the plight of the productive sector and has lowered the CRR. This move will help curb to some extent the negative sentiments in the economy in general and real estate sector in particular," Gaurav Mittal, governing council member of CREDAI & MD of CHD Developers, said.

“The CRR cut will bring in liquidity. It will help the Real Estate Market which is cash starved. However it is important to see the interest rate that shall has to come down to facilitate the home seekers to buy homes,” said Lalit Kumar Jain, National President CREDAI & CMD of Kumar Urban development.

Sathish Kumar of Anandam Foundation, one of the leading developers in Chennai, said, “CRR rate cut is a good beginning as this will make banks to reduce the interest burden on the housing loans. This will intern bring back customers to the industry, which has been plagued by serious macro-economic problems for the last two years.”

Kamal Khetan, MD, Sunteck Realty said, “The cut of 50 basis point will surely bring liquidity in the market. The move will tame inflation and act as a stimulus to growth. For the real estate industry, there won’t be immediate effect on borrowing however we could expect a reduction of interest rates in the months ahead.”

Earlier two of the leading industrial bodies FICCI and ASSOCHAM have welcomed the RBI’s move to cut the CRR.  This is a bold step to rein in inflation and address concerns over growth, which are now taking centre-stage with the GDP growth rate likely to touch 7 per cent in 2011-12, said ASSOCHAM in a statement. 



"The RBI decision to reduce the CRR from 6% to 5.5% is a welcome step,” reacts R V Kanoria, President, FICCI. However, given the uncertain growth prognosis for the current fiscal, a cut in repo rate may have acted as a strong enabling factor in spurring investment activity, he opined.