Realty sector welcomes more liquidity but wants rate cut

The industry also sought measures to lower borrowing cost and boost housing demand.

Updated: Sep 17, 2012, 20:11 PM IST

New Delhi: The real estate industry on Monday expressed hope that a part of Rs 17,000-crore worth liquidity infused by RBI into the financial system would flow into the realty sector.

The industry also sought measures to lower borrowing cost and boost housing demand.

"This (CRR cut) will help in generating liquidity and some part will flow into the real estate, which is much required given the compression of liquidity within the real estate industry," property consultant Jones Lang LaSalle (India) Chairman and Country Head Anuj Puri said.

Puri, however, said that "it is also important to bring down the high interest rate to enable the real estate industry to make sound and good progress".

CREDAI, the apex body of realtors, welcomed the RBI's decision to cut cash reserve ratio (CRR) by 0.25 percent, but felt that reduction in repo rate was needed to encourage the real estate sector.

"We welcome the CRR cut. Though a repo rate cut was what would have really triggered the real estate market and was extremely needed to support this sector, which would have given a kick-start to nearly 300 affiliate industries which would contribute to the IIP," CREDAI NCR officiating President Geetamber Anand said in a statement.

Housing demand has been hit due to high interest rate on home loans, affecting the business of real estate developers. The interest outgo of realty firms, sitting on a huge debt, have also gone up significantly leading to reduction in their margins and profitability.

Commenting on the RBI's move, Ramprastha CEO Nikhil Jain said: "This (CRR cut) is expected to ease off loans to industries and consumers, which is a positive for the real estate sector. The measure will improve supply of loan but not the cost of loan."

Jain, however, said: "A little action on the rate side would have been even more encouraging for the productive industries and would have lifted corporate and household sentiments in the sagging economy."

RBI on Monday reduced CRR, the percentage of deposits banks keep with central bank, to 4.5 percent, but kept the repo rate, at which the central bank lends to the banks, and the reverse repo rate, at which it absorbs excess liquidity through borrowings from banks, unchanged.