RBI's mid-term credit policy impact on realty

What is the impact of the RBI’s mid-term credit policy on the real estate sector? According to Sanjay Dutt, Executive Managing Director, South Asia, Cushman & Wakefield, “A further rate cut would have resulted in positively influencing the sentiments within the sector.

However, reduced CRR and repo/reverse rate cuts do not automatically translate into reduced interest rates for mortgages, which would have pushed the sales volumes in the residential section up higher. Banks have to take into account other factors before deciding on lowering their interest rates for retail customers. For developers, in any case, financing options from the banking industry have been restricted since some time and they have had to mainly depend on other sources such as ECBs and PE investments. Hence, they will mostly remain in a status quo. The main concern for buyers and developers is related to the inflationary trends that persist in the economy, as their finances get impacted on a much bigger level.” Points out Simon Rubinsohn, Chief Economist, RICS, “Our suspicion is that a further interest rate cut is likely over the coming months with the prospect of a stronger response from the RBI - if the headline inflation picture does begin to reflect the more benign core trend.” According to Pranab Datta Vice Chairman & Managing Director, Knight Frank India, “For the real estate industry, battling sluggish conditions for quite some time, the decision means that the hostile environment will extend  further and preempt any respite to the industry stakeholders.”