MUMBAI, 1st February 2015: After a period of policy paralysis and a perceived slow-down in buying, the real estate industry is moving back to ‘positive sentiments’, especially after the change in government at both, the Centre as also in the state of Maharashtra. The reason is simple: post the change in government, we have seen positive announcements, and these have played a major role in sentiment moving from ‘negative’ to ‘positive’.
Finance is the life-line of real estate for both, the real estate developer as also the home buyer. After a period when the inflation rate steadily came down, we finally saw the Reserve Bank of India (RBI) giving real estate a reason to cheer on the festive occasion of Makar Sankranti: reduction in the repo rate by 25 bps. This was a welcome step, but by itself, it is not sufficient to create any real benefit for a home buyer. Taking this as the starting point, I would expect that the Union Budget will include measures that would result in a significant lowering of home loan interest rates.
I also factor in statements by the Hon’ble Minister for Housing on the importance of reducing home loan interest rates, and look forward to the budget having positive indications in this regard. Across the nation, real estate developers, home buyers, home finance institutions and banks would be keenly awaiting such an announcement, which is expected to result in significantly increasing ‘positive sentiment’.
From the perspective of real estate developers, I hope that the budget will do the needful to bring down the cost of borrowing for developers, because raising capital for development of new projects remains a huge challenge. Lending rates for real estate development from institutional finance sources are high, raising funds through other sources even more expensive. I hope that the interest rates on lending to real estate developers will come down post the budget; this will help rationalize the cost of construction. It will also have a positive impact for home buyers, as it would also help in reducing property prices.
Niranjan Hiranandani is MD, Hiranandani Constructions Pvt Ltd.