Two days after writing an open letter to Prime Minister Narendra Modi seeking his immediate intervention to revive the ailing real estate sector, the Confederation of Real Estate Developers Association of India (CREDAI) has written to the RBI Governor for measures to pass on the benefit of reduction in repo rates and reverse repo rates to the real estate sector.
The apex developers’ body, representing 20,000 developers across the country, has written to RBI Governor Shaktikanta Das requesting him to pass on the benefit of reduction in repo rates and reverse repo rates to Non Banking Finance Companies and Housing Finance Companies.
RBI has announced various measures to infuse liquidity into the system to tackle the crisis caused by COVID-19. However, real estate sector has not been able to leverage the benefits of this reduction in repo rates, said CREDAI chairman Jaxay Shah, president Satish Magar and president-elect Harshavardhan Patodia in their letter on Wednesday.
“One of the major restricting factor remains that while the RBI has reduced 2.50% in repo rate since January 2019, the maximum reduction passed on by the bank to the borrowers has been between 0.7-1.3% largely from August 2019 till date, and in some case the benefit has not been passed at all,” they said.
Real estate industry was still getting access to finance at much higher rates, therefore, provision of appropriate directions to the banks for percolating the benefits of the rate cuts to the NBFCs/HFCs needed to be made. “For the real estate sector, NBFCs and HFCs are a major source of financing. This will enable NBFCs and HFCs to lend to real estate sector at a lower rate of interest, which will help the survival of crumbling industry,” they urged.
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 having backward and forward linkages with almost 250 industries, including cement and steel. “Our survival henceforth becomes crucial for the economy and we appeal for your immediate intervention,” they said.
On Monday, CREDAI also wrote to the Prime Minister that the real estate had remained one of the most affected sectors due to COVID-19.
Liquidity crunch, stagnant demand and cartelization of the raw material were major impediments to the real estate industry to kick-start, they said and urged Prime Minister’s intervention.