Tag Archives: Realty Industry

Realty Industry Feels Rate Cut as Benefit for All

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The interest rate sensitive realty industry Tuesday welcomed the Reserve Bank of India’s (RBI) decision to cut key lending rates by 50 basis points, and felt the move will boost builders’ and home loan customers’ sentiments alike.

“For the real estate in particular, this is indeed a welcome step by RBI. While the sector was already reeling under the pressures of high interest rates, this will allow banks to lower down the interest rates significantly. Both buyers and developers shall get benefitted from this,” said Pradeep Jain, chairman, Confederation of Real Estate Developers’ Association of India (CREDAI).

Home loan buyers are currently paying a higher rate of interest in the range of 11.50-13 percent on floating basis. Customers, who had earlier opted for dual rate scheme and now just exhausted their fixed tenure rate, are paying the same rate of interest.

Other industry players like Unitech and real estate consultancy firm Cushman & Wakefield also welcomed the move, which they said would boost business confidence.

“This development will have a positive impact across the economy and particularly in the real-estate industry. Not only will the cost of borrowing rationalize, this reduction will also provide an impetus to growth and enhance business-confidence,” said Ajay Chandra, managing director, Unitech.

Cushman & Wakefield India said that the banks are expected to pass on the reduction in interest rates to consumers, which will provide a positive boost to market sentiments especially in the residential sales markets.

“We expect to witness some pickup in the volume of sales transactions. For the whole of last year, end buyers had to defer their purchase decisions as they were facing the double-edged sword of rising interest rates and stubborn price levels,” said Anurag Mathur, managing director, Cushman & Wakefield.

The RBI’s announcement also buoyed the BSE Realty index which grew by 32.50 points at 1,813.97 points around 2:50 p.m. Stocks of realty industry players also surged with DLF’s scrip growing by 3.75 points or 1.88 percent at 203.25 points.

RBI might unveil its mid-quarter policy review on September 16

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Since the home buying continues at its full pace even after an impending rate hike by Reserve Bank of India due to which there have been a continuous rise in property prices, the realty industry now is completely free from tensions, i.e,  has shrugged off all its worries. Due to the still high food prices, many economists expect a fifth round of policy rate hikes towards the end of this month. Most probably, RBI will unveil its first-ever mid-quarter policy review on September 16.
However, the developers are still cool and confident for the residential sales even after a possibility of rate hikes by RBI are almost next week. The chairman of CREDAI, Confederation of Real Estate Developers’ Associations of India, Mr. Kumar Gera say that since the buyers fear of price rise in future, therefore they will not stop investing right now. These days an investor does not see the price if he can afford it, he added. Therefore, this price hike won’t make much difference to the market.

Truth Behind Declining Realty

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Pranab Mukherjee

FINANCE MINISTER MR.PRANAB MUKHERJEE


Few days after the budget is announced the Realty Industry started showing discontent in concern with the service tax policy announced by the union finance minister, Pranab Mukherjee. The Confederation of Real Estate Developers’ Association of India (CREDAI) with the Surat Builders association wrote a letter dated March 5 to the finance minister, Pranab Mukherjee asking to withdraw service tax imposed on sales and renting of commercial and residential spaces.

In the letter to the Centre, the association has also said that a inclusive action plan for urban housing is necessary as there is a shortage of 27 million houses in the country presently.
President of Surat Builders’ Association and the vice-president of Gujarat chapter of CREDAI Tarun Rawal said that if we look at the population explosion in the city the figure has gone up to 46 lacs very fast but there is a shortage of about 5 lacs shelters in the city itself. He added that the need for sustainable housing in most of the big cities is huge and to fulfill that we must have a central policy and plan to guide it.

The association compels the Union finance minister to look into the matter of service tax imposed on housing sector as the sector is crucial for growth to create affordable housing. Slum re-development and integrated township incentives are also required. “Only if this is provided the sector will be able to fulfill the need of a growing nation,” said Rawal.

It is argued by real estate developers that the imposition of service tax will eventually make buying houses more difficult for the middle and lower classes. Similarly, service tax on rented property will adversely affect sectors like IT sector since they are already showing declining trend when the US restrictions have affected them.

What the finance minister decides is what should be looked for now.