[ecis2016.org] In the backdrop of the RBI reducing its repo rates to its lowest in the last five years; and banks passing on the benefit to its home loan customers, RBI governor Raghuram Rajan, has now asked builders to reduce prices, to encourage home buyers
Having cut the interest rates, RBI governor Raghuram Rajan has now put the onus on real estate developers, asking them to reduce prices to encourage more people to buy properties.
Rajan’s remarks also come against the backdrop of low demand for housing projects, leaving developers with unsold inventories.
“I am hopeful that as interest rates come down, there will be more credit and buying. I am also hopeful that prices adjust in a way that encourage people to buy,” Rajan said, while delivering the YB Chavan Memorial Lecture, in Mumbai.
The Reserve Bank of India (RBI) has lowered rates by 1.5 per cent cumulatively since January last year, and earlier this month, the policy rate was cut by 0.25 per cent, to 6.5 per cent – its lowest level in more than five years. More than half of the rate cuts have been passed on by the banks to consumers. “My sense is that there is a little bit of everything that needs to happen” for the revival in the real estate sector, Rajan said.
[ecis2016.org] RBI cuts key rate by 0.25% and urges banks to pass on benefits to customers
“There is an issue of certainly how they see the housing market and how they see prices. There has to be an adjustment so that more people want to go and buy,” he noted.
According to Rajan, apart from interest rates, measures such as including affordable housing loans under the priority sector lending requirements, makes him confident that concerns on the financing side, have been taken care of.
When it comes to finance to developers, Rajan pitched for more transparency on the borrower’s side. “We need action on real side (as) also on transparency, on land acquisition, construction and sales,” he emphasised.
Further, Rajan said more transparency in such matters, would enable financiers to better track flow of funds; which project was being funded by who, and who all were the other financiers. Construction of every kind, including houses and roads, is a big source of growth, especially, for a developing economy like ours, he stated.
Copyright belongs to: ecis2016.org