Here is good news for home buyers
and realty investors in Delhi NCR region. In its third quarter review of
monetary policy that the RBI signaled a change in the focus of its policy
initiatives — from containing price rise to fuel economic growth.
In a policy statement, the RBI
governor D Subbarao said in a statement that the balance of the policy stance
has shifted to growth.
This decision will help real estate sector in a
great way. As the economic growth accelerates, the mood in the markets will
become more vibrant. The new direction of the policy initiatives of the central
bank, experts feel, is towards softening interest rates. It will bring back
investors and home buyers, who were so far not ready to take the plunge in the
market, owing to the uncertain market conditions.
However, the maximum benefit will
accrue to the first-movers. At present, prices of apartments in many micro
markets like Noida, Greater Noida, Ghaziabad, Crossings Republik, Raj Nagar
Extension, etc, are very competitive.
But, as soon as interest rates
fall and the economy revives, the sentiment will turn bullish and prices will
appreciate fast. Therefore, it is advisable to buy a house on variable rate of
interest, at present. In this case, initially, you may have to pay the EMIs at
the prevailing high interest rates. But, as soon as interest rates fall, your
EMI will also get lowered. In the bargain, you will get your house at the
current lower price. However, if you wait for the interest rate to fall, the
prices will go up by then.
As a major shift in its policy
initiatives, the central bank decided to infuse liquidity into the monetary
system — first time since March 2009.
On Tuesday, the RBI decided to
reduce the requirements for banks to keep cash balance with the central bank,
which is also known as cash reserve ratio (CRR), by half a percentage point, to
5.5% of total deposits. This will release around Rs 32,000 crore, which can be
loaned to the productive sectors. This will not only increase the availability
of funds in the market, but will also help soften the interest rates.
Chanda Kochhar, MD and CEO of
ICICI Bank said that the CRR cut could signal a turning point in the economic
trajectory. “Going forward”, she says, “we could see an improvement in
confidence among companies and investors, which would take India’s growth back
to its earlier trajectory in the medium term.”
The last few months have seen a
moderation in growth and volatility in capital flows and currency, she says.
RBI’s current year growth projection of 7% is in line with the expectations of
the government and many market participants. At the same time, the RBI is
estimating an improvement in the growth rate in the next fiscal year, which
will certainly help in improving the sentiments in the market.
Anshul Jain, the CEO of global
realty consultancy firm DTZ India, says that the CRR cut by the RBI is
definitely a step in the right direction and will improve the sentiments in the
real estate community. Global financial research firm, Goldman Sachs, in its report
said that through the CRR cut, the RBI has followed the sequence of easing of
liquidity condition in the monetary market. This, the report says, will follow
with the interest rate cut.
DTZ’s Jain says the real impact
will be felt when the RBI lowers interest rates and the commercial banks, in
turn, lower the lending rates on home loans. If that were to happen,
it will surely bring back serious buyers and investors into play and the sector
would see renewed activity. Jain also says that Noida and Greater Noida markets
would benefit with a rate cut as these micro markets have a concentration of
low budget housing.
