The trimming of Cash Reserve Ratio by the RBI has brought in a wave of hope in the realty industry, says RAJIV DOGRA.

The recent announcement by the Reserve Bank of India (RBI) to slash the Cash Reserve Ratio (CRR) by 50 basis points (bps) or 0.5 per cent is being viewed as a step in the right direction. CRR is the proportion of deposits the banks have to keep in the RBI, which now stands at 5.5 per cent.

The realty market remains hopeful that the cut by the central bank would prove to be a boon for the cash-starved industry. Says Sanjay Bajaj, Managing Director - Pune, Jones Lang LaSalle India: "The RBI has cut the cash reserve ratio for banks by 50 basis points in order to open up liquidity in the market, and this is a precursor to a reversal in the interest rate cycle. As such, it is positive development and brings a badlyneeded ray of hope to the real estate sector, which has been hit hard by the crippling interest rate regime which unfolded in 2011. Actual end-user benefits will be seen only when the repo and reverse repo rates soften. It is likely that this will happen by March, which could mean that fence-sitting property buyers will display more positivity by April."

Similarly, Lalit Kumar Jain, National President - CREDAI and CMD, Kumar Urban Development Ltd, says, "The CRR cut will bring in liquidity. It will help the real estate market which is cash starved. However, it is important to see the interest rate that has to come down to facilitate the home seekers to buy homes."

Endorsing similar views, Rohit Gera, Joint Managing Director, Gera Developments, points out that the cut of 50 basis points will surely bring liquidity in the market. "The move will rein in inflation and act as a stimulus to growth. However,for the real estate industry, there won't be immediate effect on borrowing, however, we could expect a reduction of interest rates in the months ahead," he adds.

Moreover, this move will help the realty industry source funds available for existing and new projects. Atul Goel, MD, Goel Ganga Group believes that the RBI rule is definitely an encouraging step. "The RBI has ensured that it brings in a balance keeping in mind and encouraging the need for growth required for the real estate industry. This move would help to improve the liquidity position of the realty sector. The reduced interest rates will see in an enhanced increase in housing demand. The interest rates will come down in the next quarter. At the given point it's crucial that the interest rates must be balanced. This move is a positive step for the realty and infrastructure industry as it indicates that the RBI is also concerned about the nonavailability and high cost of funds," he says, adding that the policy will also help to ease inflation.

Earlier, the central bank had hiked these key rates almost 13 times from March 2010 to October 2011. The present move to slash CRR has brought hope in the realty market who hope that the RBI will soon ease its stance against the tight monetary policy.

QUICK BYTES

THE RBI HAS CUT THE CASH RESERVE RATIO FOR BANKS BY 50 BASIS POINTS IN ORDER TO OPEN UP LIQUIDITY IN THE MARKET, AND THIS IS A PRECURSOR TO A REVERSAL IN THE INTEREST RATE CYCLE

EXPERTS BELIEVE THAT THIS MOVE WILL HELP THE REALTY INDUSTRY SOURCE FUNDS AVAILABLE FOR EXISTING AND NEW PROJECTS