Realtors disappointed at RBI stance

The real estate industry was disappointed with the RBI keeping key rates unchanged.

Mr Lalit Kumar Jain, President of the Confederation of Real Estate Developers’ Association of India, said it was a disappointment once again from the RBI.

There was no change in the rates in the previous policy and the real estate sector was expecting a rate cut this time. Both the developer community and home buyers are unhappy and this will affect the already disheartened real estate sector.

“We do not see any positive policies from the government to boost the real estate sector and economy as well. We keep our fingers crossed and hope the next credit policy will bring some cheer,” he said.

The President of the Maharashtra Chamber of Housing and Industry, Mr Paras Gundecha, said the RBI’s decision was “absolutely shocking’’.

“The real estate sector is already facing difficult times, and a rate cut would have been a boon and fuelled growth. This will further affect the already demoralised real estate sector.

“We feel there is a need for an intervention from the Finance Ministry so that the real estate sector and the economy did not get into depression,” he said.

Mr Anshuman Magazine, Chairman, CBRE South Asia, said the real estate market direly needed a rate cut to boost investor sentiment. The sector is the growth-engine of the nation’s economy, but it seems the sector does not figure in RBI’s policies at all. This decision will further affect the already burdened real estate sector in the country.

The Chief Economist of RICS, Mr Simon Rubinsohn, said it was a disappointment despite the lowering of the statutory liquidity ratio.

The prospect of a softer economy coupled with little additional stimulus from the central bank suggests that the flatter trend in the commercial real estate sector, which was highlighted in the RICS survey, will persist through the second half of the year with weaker occupier demand feeding through into rent levels.

For the residential sector, prices in key centres are likely to remain generally firm, he said.

Mr Brotin Banerjee, Managing Director, Tata Housing, said the housing market will see a revival once the general economic conditions improve.

Although investor sentiment is depressed at this time, partially due to high policy rates, the demand from consumers looking to purchase their first residence remains steady. Such consumers are aware that policy rates will average out over a 15-20 year period and are willing to invest if they find the project compelling.

sshanker@thehindu.co.in

Source: www.thehindubusinessline.com

Realty sector sees no end to its woes

The liquidity-starved real estate sector has been holding on prices in both the commercial and residential segments, hoping that the tide would turn sometime soon. Unfortunately, it has proved to be a chimera as macro economic factors, which have a direct bearing on the sector, seem unlikely to improve at least for now.

Samantak Das, Director-Research & Advisory Services, Knight Frank India, a global real estate advisory, said, “we are no doubt in a high interest rate regime which seems difficult to correct. Rates are unlikely to come down for another quarter at least.”

The Reserve Bank of India (RBI) has increased the repo rate (rate at which it lends money to banks) from 5.25 per cent in the fourth quarter of 2009-10 to 8.5 per cent in the fourth quarter of 2011-12, and this has impacted sales of realty companies and their interest cost.

Consequently, for the top 25 real estate companies, interest cost as a percentage to sales has built up, and in the March 2012 quarter, it stood at 15 per cent, almost double over the March 2010 quarter, according to Knight Frank.

“For most listed entities, interest costs in 2012 alone rose 37 per cent while net profit fell 27 per cent. Such a high borrowing cost scenario is likely to continue till there is a significant improvement in the overall Indian economy.

Till then, developers are expected to absorb the hike in construction cost which, in turn, will impact their profitability,” said Mr. Das.

Lalit Kumar Jain, National President, Confederation of Real Estate Developers’ Associations of India (CREDAI), an industry lobby, pointed out that there was a problem of approvals from the environment ministry. “And due to this, stock is not coming in, and the sentiment is down.” He felt that the factors which could re-kindle activity in the sector were “a strengthening of the rupee, single-window clearance for realty projects, and, most importantly, a cut in interest rates.” There are, however, pockets of optimism. “Chennai has remained the most stable market with no major supply overhang,” Ganesh Vasudevan, Vice-President, Indiaproperty.com, said.

Source: www.thehindu.com