RBI policies will perk up sagging housing sector

Event Date: 6-Dec-08

Mumbai: Real estate players are sceptical about how much these measures would actually boost the consume confidence, which is currently weighed down by negative sentiments. 

    According to Jai Mavani, KPMGs executive director and head of real estate practice, the government’s move to increase liquidity and ease credit crunch is a step in the right direction, and this should result in cooling of interest rates. However, the government needs to look beyond these monetary policies and boost the mid-market or low-income housing projects, which would perk up the housing sector. Another factor impacting demand is the consumer sentiment, which is yet to reverse. Though real estate prices have been correcting, property buyers feel that prices are still firm and expect to fall further. 
    Transactions in the residential sector, especially in metros, have slowed down where prices had touched the sky few months back. Demand has been impacted even in the smaller cities because of high home loan rates. According to Sanjay Verma, Cushman & Wakefields south Asia & Australia MD, consumers will now have a wider choice of lenders with housing finance companies getting a refinance line from the banking industry. 
    Niranjan Hiranandani of Hiranandani Constructions said, so far, the RBI has been announcing measures to ease inflation. Now the focus is on boosting growth in the economy, of which the real estate and housing sector is a core area, having downstream effect on 260 industries like steel, cement and aluminum. The latest measures would help the real estate sector, enabling developers to restructure loans, as many projects have been delayed because of lack of availability of funds. 
    With the repo rate going down the bank must be liberal and improve liquidity in the system which will give a morale boost to the developer, but the sales can happen if home loan rates drop to around 8% and banks become more liberal in advancing housing loans. Secondly, job security during this time would also play a vital role for those applying for home loan, said real estate consultant Ashok Narang. 
    A lot depends on the banks for reducing the rates on home loan and constructions loans. The RBI should take more positive steps urgently to improve the realty sector.

Source: TOI, Page 6, Dated 7-Dec-08