No impetus to real estate industry from RBI policy measures, says CREDAI


RBI’s booster dose on May 22, has failed to enthuse the Confederation of Real Estate Developers Association of India (CREDAI).

   The apex body of real estate developers reacted unfavorably to the policy measures of the RBI and said that, it did not provide any real impetus to the sector. In CREDAI’s view, the move of moratorium extension is a short-term piecemeal solution to a long-term problem.

“To restart the economy some serious measures are required. The interest rate cut should have been accompanied with additional liquidity measures as it is the need of the hour along with one-time restructuring of loans to help the real estate sector from crumpling,” said Satish Magar, president, CREDAI.

He pointed out that, easing the pressure on borrowers by extending corporate group exposure limit from 25 per cent to 30 per cent as done by the monetary policy committee (MPC), is not enough to solve the ongoing

liquidity crisis. 

“Government now needs to ensure that banks are forthcoming and are passing on the benefits to borrowers. Currently there is no liquidity in the sector owing to the COVID crisis. The sector should get additional funding in the form of guaranteed emergency credit line similar to MSMEs,” said the CREDAI president.

According to CREDAI, the real estate industry remains the second largest employer of migrant and unskilled workers.  Warning of prolonged slowdown in the sector having a direct impact on the restarting of more than 250 allied industries, the apex body said that, it is critical for the government and RBI to take immediate measures to provide

economic relief.

“Real estate sector can act as a catalyst in resurrecting the economy if it is supported with relavent fiscal and non-fiscal measures,” said Magar. 

On the other hand, Surendra Hiranandani, chairman and managing director, House of Hiranandani, felt that, the moratorium on housing EMI’s and deferment of interest payments by another three months will give a lot of relief to consumers as they can now rearrange their finances.

  “With the cost of funds coming down for banks now due to another repo cut borrowers will stand to gain as the EMIs on their home loan are expected to fall. This is a big announcement which will ease liquidity for developers,”

said Hiranandani.

   The real estate baron has urged for quick transmission of the interest rate cut. “Transmission will be the key to the huge liquidity infused by RBI,” he said.  Hiranandani believes that, the current scenario offers excellent investment opportunities to home buyers.

“In residential real estate affordability is at all time high. The post-pandemic world will be good for the real estate sector, the one sector that will emerge as the silver lining in such a bleak scenario and offers you the best bet – stability, security and safety,” said Hiranandani

Meanwhile in Goa, Lincoln Bennet Rodrigues, founder and chairman, Bennet & Bernard Group, welcomed the interest rate cuts along with the further extension of loan moratoriums. “It is definitely a welcome move and will benefit the real estate sector in the future. It will enable banks to lend even more and push many fence-sitters onto the market as home loan interest rates are expected to fall down,” said Rodrigues.

On May 22, the monitory policy committee of the RBI, reduced the repo rate under the liquidity adjustment facility (LAF) by 40 bps to four per cent from 4.40 per cent with immediate effect. Accordingly interest rates on the marginal standing facility (MSF) rate and the bank rate also got lowered. The reverse repo rate under the LAF is presently reduced to 3.35 per cent from 3.75 per cent and the bank rate is reduced to 4.25 per cent from 4.65 per cent. The RBI also extended the moratorium on loans and interest repayments by another three months, viz.  from June 1, 2020 to August 31, 2020. Simultaneously the RBI extended all previous fiscal reliefs announced for the  ongoing COVID-19 crisis.