RBI policy big letdown for realty sector: MCHI-CREDAI

Moneycontrol Bureau

While the Reserve Bank of India on Monday maintained status quo in its mid quarter monetary policy on concern of inflation, real estate body MCHI-CREDAI expressed disappointment on the no-action.

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"The RBI's decision to keep the repo and CRR rates unchanged is letting the entire industries in general and housing industry in particular, down considering the slowdown in the economy. A cut in both the rates was the need of the hour as it would have led banks to bring down the rates and made home loans affordable to the buyers," said Vimal Shah, President, MCHI-CREDAI in a statement.

Underscoring the need to revive gloomy investment scenario, Shah observed, a policy rate cut could have given the required succour to the customers at large.

"Considering the past few cuts in the rates, Industry and home buyers were expecting the similar cut this time too. The unchanged rate will hamper home buyer's decision to go ahead with their purchases," he said.

However, home loan lenders strongly believe, a borrower does not delay his/her decision to buy dream home due to higher interest rates. It is only a handful of investors, who may be buying homes only for investment purpose, takes decision on different economic parameters.

Moreover, banks are in no mood to pass on benefits of interest rate cuts unless the central bank cuts the cash reserve ratio (CRR) or the portion of deposits banks are mandated to keep with the RBI.

During January 2012 to April 2013, according to India Ratings, the domestic arm of global rating agency - Fitch, the repo rate had been reduced by 100 bps, reverse repo rate by similar margin and cash reserve ratio by 200 bps.

"Public sector banks, median base rate reduction was only 45 bps, while median base rate reduction by private banks was zero. Certainly, some private sector banks reduced their base rate by 25 bps to 40 bps," the India Ratings research report said.

"We hope, the central bank will at earliest slash both the repo and CRR rates in the same succession as it went on increasing and derailing the entire growth of the economy," concluded Shah.