Rate cut Is Fine, it’s Prices that Matter
For real estate companies, the only way to attract liquidity into the system seems to be to pin their hopes on prospective buyers queuing up at the sales counter. “The signal will serve as a boost for the sector with sentiments of buyers turning favourable. Banks may pass on the benefits to the consumers by easing off the lending rates. Home loans may get cheaper, facilitating the buying decision of the consumers,” says Gaurav Mittal, Managing Director, CHD Developers.
“The industry expects more such steps to improve liquidity and reduce interest rates to increase investments,” says Anshuman Magazine, CMD, CBRE South Asia, a real estate consultancy.
Fund flows to the real estate sector are drying up. The much-touted investment avenues such as real estate investment trusts and real estate private equity have not taken off as expected. Recently, the RBI said it did not favour the granting of industry status to real estate — a key demand of the sector for that would enable funds to flow easily.
Which leaves the only avenue: the buyer who bears most of the burden of financing a project and the only channel for reliable cash flows for a developer. The rate cut would provide a marginal benefit, but can do nothing to address the core issue: high prices.
“A sharp revival in the fortunes of the industry will be accelerated if the demand resistance arising
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