Saturday, April 21, 2012

Softening in credit policy useful for realty investors


The recent move by the Reserve Bank of India (RBI) in its annual Credit Policy has given some hope for investors within the reasonable housing phase. this can be being seen as a positive development for the property market. whereas investors stay cautious and watch for banks to announce the lowering of interest rates, realtors are optimistic of the state of affairs, however, hoping that inflation remains underneath check.

“While the speed cut of fifty basis points is unquestionably a ray of hope, it doesn't dispel the shadows nearly the maximum amount as is also initially supposed. It ought to be borne in mind that the Reserve Bank of India (RBI) has hiked interest rates thirteen times between March 2010 and October 2011,” says Om Ahuja, CEO – Residential Services, Jones Lang LaSalle India.

“While this can be understandable, given the continuing issues over inflation and liquidity within the market, the spate of rate hikes has created a compounded drawback for the residential land sector. The series of hikes within the past have conjointly affected the worth that builders placed on their properties, since their own prices of borrowing have increased. it's unlikely that property costs can return down thanks to this rate cut. In fact, it's terribly doubtless that there'll be an upward bias on property rates thanks to the anticipated improvement in sentiments of consumers who have thus far been sitting on the fence, looking forward to some signals of relief,” adds Ahuja.

Shrinivas Rao, CEO, Vestian world Workplace Solutions says the reduction in repo rate can boost economic growth and improve business sentiments that in flip can strengthen shopping for activity. However, the impact can vary across sectors looking on implementation of the cut by leading banks. “Leading lenders are doubtless to chop interest rates on deposits and loans. Home loans are doubtless to show cheaper. as an example, a twenty five basis purpose cut may lower home loan EMIs by Rs sixteen per Rs one lakh. A cut within the repo rate {will also|also can|will} cut back the interest on industrial loans that in flip will favour developers to avail cheaper loans, thereby providing traction to land activity. Cheaper loan rates are expected to draw in additional end-users, impacting the residential sales absolutely,” he says.

With banks giving loans at cheaper rates, developers are doubtless to like the bank loans as against non-public equity funds. However, a rise in market demand within the short term can drive capital values, thereby benefitting retail investors, adds Rao.

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