RBI Rate Cut
Badly battered slump-hit real estate developers have welcomed the Reserve Bank of India's decision to inject Rs 18,000cr liquidity as they feel that the move will further cut home loan rates and boost demand significantly in the realty sector. In a recent move the RBI has cut the short-term lending rate called repo by 0.25% to 7.75% and this means that it will reduce the borrowing cost for individuals and corporate. In addition, the bank also cut Cash Reserve Ratio by similar margin to four% and the move would improve the availability of funds to loan seekers. This is a small but necessary positive move to boost investment as well as demand in the sector and such growth oriented monetary measures combined with the Government's fiscal acumen should augur well for the industry in the coming fiscal, Managing Director, Unitech Ltd, Sanjay Chandra said.

According to experts the real estate players have huge inventory pile up and unfinished projects owing to high borrowing costs and in view of this the individual buyers too have been fence sitting due to high rates and weak economic sentiments. The residential sector launches have declined 30% in 2012 compared to 7% in 2011. Banks' credit exposure to developers has fallen from its peak growth rate of 23.21% in June 2011 to 3.88% as per the latest reported data on Sep-2012, say Knight and Frank's estimate's. Developers are cautious of launching projects as the gap between the launch and the absorption numbers reduced to 32,000 units in 2012 compared to 82,000 and 94,000 units in 2010 and 2011, respectively. In fact, the rate cut coupled with the lower CRR should provide great relief to real estate industry that has been reeling under the burden of huge debts on one side and poor cash flows caused by slowdown in sales for sometime now, commented Chairman, Knight Frank India, Pranab Datta.