Macro-economic stability will ensure affordable housing: RBI

Last Updated: Tuesday, July 10, 2012 - 14:51

New Delhi: Against the backdrop of banks showing reluctance to provide loan to real estate, Reserve Bank has said it has been following a cautious policy to ensure sustainability and viability of the housing sector.

"Our main focus is to maintain macro-economic stability. If there is macro-economic stability, if there is lower inflation, and if there is no asset price bubble, obviously interest rates will come down and houses will be affordable," RBI Deputy Governor H R Khan said at an National Housing Bank event here.

He said RBI would ensure that the housing sector remains sustainable and viable over a long period of time. "Our approach has been to see that the whole sector becomes de-risked," Khan added.

"NHB has also played its role in de-risking the sector. You must have all known about a major initiative it has taken in promoting what is know as Indian Mortgage Guarantee Company as a joint venture. It is going to be a game-changer in so far as credit risk mitigation of the lenders are concerned," he said.

The outstanding loan of banks to the housing sector is about Rs 4 lakh crore, while that of housing finance companies' is about Rs 2 lakh crore.

Khan further said that even though "we have serious issue about foreign flow in real estate sector for affordable housing we are in dialogue with the government to provide some ECB scheme".

In the 2012-13 Budget, the government had allowed external commercial borrowings (ECBs) for low-cost affordable housing projects, to make available additional houses for the low-income groups in major cities and towns.

ECBs are being permitted by the government for providing additional source of funds to corporates and PSUs for financing expansion as well as for fresh investment in various sectors.

Meanwhile, National Housing Bank introduced special refinance scheme for low-income housing.

On liquidity, Khan said, RBI's open market operations (OMOs) to pump in liquidity in the system would depend on the overall situation in the money market.

"Depending on the liquidity situation, RBI will come with OMOs... We have indicated on a sustainable basis plus or minus 1 per cent (deposits). If it is beyond that, then we will consider (OMOs)," he said.

The RBI had on June 22 pumped in about Rs 12,000 crore into the system by buying government securities commonly known as OMO to ease the liquidity situation. OMOs help the RBI to manage the liquidity deficit int the system.


First Published: Tuesday, July 10, 2012 - 14:51

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