It has maintained that the real estate industry has not been able to leverage the benefits of repo rate cuts as banks have not passed on the same to the borrowers.
Credai, the apex realty developers’ body, has written to the Reserve Bank of India governor, Shaktikanta Das, requesting him to pass on the benefits of reduction in repo rates and reverse repo rates to non-banking finance companies (NBFCs) and housing finance companies (HFCs).
It has maintained that the real estate industry has not been able to leverage the benefits of repo rate cuts as banks have not passed on the same to the borrowers. “One of the major restricting factors remains that while the RBI has reduced 2.50% in repo rate since January 2019, but the maximum reduction passed on by the bank to the borrowers has been between 0.7% and 1.3%, largely from August 2019 to date, and in some case the benefit has not been passed at all,” Credai wrote in the letter.
The association has highlighted that the real estate industry is still getting access to finance at much higher rates. So, provisions need to be made for appropriate directives to banks for transferring the rate cut benefits to the NBFCs/HFCs. “For the real estate sector, NBFCs and HFCs are a major source of financing. This will enable NBFCs and HFCs to lend to the sector at a lower rate of interest, which will help the survival of the crumbling industry,” it said.
The industry body noted that being the second-largest employer of the country, the realty sector contributed substantially to the GDP and accounted for almost 11% of banks’ credit. “Besides, we have backward and forward linkages with almost 250 industries, including cement & steel etc. Our survival henceforth becomes crucial for the economy,” the letter said.