Real estate developers frustrated over credit policy

Real estate developers and consultants expressed disappointment over the RBI’s credit policy announced today and has asked the apex bank to infuse more liquidity into the system and to the property sector.

“It’s disappointing but understandable,” global real estate consultant Cushman and Wakefield Managing Director (South Asia) Sanjay Verma said.

He noted that though inflation has begun sliding, it is still in double digits, so there is always a fear that additional liquidity can stoke a price rise.

“For me, the availability of credit to developer should be the bigger priority. Demand is there, someone needs to supply,” Verma added.

The liquidity situation is bad enough to delay construction and this condition is worse than the high interest rate regime, he said.

“There is disappointment as the financial markets and the entire productive sector were expecting some relief from the credit policy as it was anticipated that RBI would reduce the bank repo rate and CRR,” Parsvnath Developers Ltd Chairman Pradeep Jain said.

The policy has shaken the confidence of investors to the extent that the Sensex fell to its lowest since 2006, he said.

Suncity Projects Director Ashok Bansal too expressed unhappiness over the policy. “We were expecting some relief from RBI but that did not happen. We are disappointed,” he said.

Amit Sarin of Anant Raj Industries said: “We are disappointed. The RBI should take some bold decisions to bring back positivity in the market”.

The apex bank today announced the credit policy keeping repo rate unchanged at 8% and CRR at 6.5%.

One Comment

  1. Posted October 30, 2008 at 3:53 am | Permalink

    Following the footsteps of financial institutions and aviation companies, the real estate sector also plans to approach the government for a relief package. Realty industry bodies such as the National Real Estate Development Council (Naredco) and Confederation of Real Estate Developers Association of India (Credai) are all set to approach Prime Minister, Mr. Manmohan Singh with their wish-list next week. Mr. Rohtas Goel, Vice-President of Naredco, and Chairman and Managing Director of Delhi-based Omaxe Ltd, said, “Our main demand is that affordable housing should be withdrawn from section 80 IB (10) and moved to section 80 IA. The government has to make houses less than 1,500 sq ft in area tax-free. Even the stamp duty should be waived for affordable housing projects,” Mr. Goel said. “Our second demand is that banks restructure the debt they give to builders and lower the rate of interest,” he added. Credai, a real estate body that has 10 member associations from various states, has already dashed off a letter to the PM seeking a meeting. Mr. Lalit Kumar Jain, VP, Credai, said, “We want the government to instruct banks to take proactive measures to create liquidity in the market. We also want the government to do away with taxes it has imposed on developers for building residential properties.” Mr. Jain said a developer pays 35% tax for the development of any residential project. Realtors want these taxes cut to zero.For more view-

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