CREDAI: Demands reduction in interest rates

Real Times • 29 September 2014
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The Confederation of Real Estate Developers’ Associations of India (the apex body for private real estate developers in India) is disappointed with the status quo on the RBI policy rates and demands  a reduction in interest rates to facilitate lowering of entry barrier and spur demand for the real estate sector.  CREDAI emphasizes on the need to device a formula to make home loan rates independent of inflation, keeping in view the mission to provide housing for all by 2022 & exponential impact of the real estate sector on triggering the GDP growth.

Speaking on the development *Mr. C Shekar Reddy National President CREDAI said," The real estate sector has been dabbling with high cost of land, labor, material, funds & high rates of taxation along with the moderate demand over the last few months. The industry was looking forward to a reduction in interest rates and improved liquidity to usher growth and development. We were hopeful that RBI would follow the host of initiatives and budgetary allocation for the real estate sector ie. an allocation of Rs. 8000 Cr to rural housing fund run by NHB, Rs.7060 Cr. assigned for the development of 100 Smart cities, Rs.4000 Cr is allotted for low cost housing via NHB and Rs.50,000 Cr. for Urban Infra Projects besides relaxation in FDI norms for Real Estate and tax pass through status for REIT’s by softening the interest rates to reduce the cost of borrowing and stimulating housing and urban development. The developers are looking for a road map for the utilization of the funds allocated to trigger the demand and growth in the real estate sector. Clarity in policy along with a lowering of cost of borrowing will help developers to firm up their plans for bridging the existing housing shortfall of 18.7 million units in the urban areas and gear up to meet the expected demand for housing of 60 million units by 2030.”

Adding to this Mr. Reddy said, “RBI had also allowed the banks to issue long term bonds with a minimum maturity of 7 years to raise funds for affordable housing projects and treat loans under the priority sector
lending for project funding for affordable housing and home loans to individuals upto Rs.50 Lakhs for houses worth Rs. 65 Lakhs located in the 6 metropolitan cities and Rs. 40 Lakhs for houses of values Rs. 50 Lakhs for other centres for purchase /construction of dwelling unit per family. These initiatives along with the increased limits for tax deduction under section 80C and 24(b) of the Income tax act have enthused the people towards acquiring the residential property. However the lending rates are still very high and limit the eligibility of the home buyer. We are looking forward to devising a formula, independent for the prevailing inflation to provide home loans at reduced rates to ensure increased eligibility and a larger participation of the youths towards purchasing a home early in their career to stimulate the demand for housing, taking advantage of the long term tax benefits and the present low price of the real estate in the country”.

The housing sector is poised to grow manifold in the next decade and a half and will require a capital investment of about $1.2 Trillion. RBI should liberalize the norms, increase the lending to the real estate sector in
line with the global exposure of 24-32% as compared to the present 12% and lower the interest rates so that this sector with the high multiplier effect can propel the economy to the double digit GDP growth leading to
accelerated capital formation not only in this sector but also in all the associated supply industries.

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