 "Realty, infra firms say CRR cut positive for sector, will infuse liquidity")
With the Reserve Bank of India’s (RBI) cut in the cash reserve ratio (CRR) by 50 basis points, real estate firms are hoping that banks will lend more to the sector, helping to mitigate liquidity issues.
Dr Niranjan Hiranandani, chairman of the National Real Estate Development Council (NAREDCO), believes that the CRR cut will augment the credit-lending capacity of banks, making more funding available in the market to enhance business growth.
Anuj Puri, chairman of Anarock Group, stated that the RBI cut the CRR to address liquidity woes. “This cut in CRR is positive for the Indian real estate sector, as banks will have higher lending capacity. This directly supports developers in borrowing more for development,” he added.
Aman Sarin, director & chief executive officer, Anant Raj Limited, projected that the CRR cut will free up additional funds for banks, enabling increased lending to both retail and institutional borrowers.
Nitin Bavisi, chief financial officer (CFO) of Ajmera Realty & Infra India Ltd, called the CRR cut “a big positive.” He believes it will help infuse over Rs 1.6 lakh crore into the system. “Not only will it ease liquidity, but it will also reduce deposit and lending rates, albeit with a lag effect,” he added.
Hopes dashed, but stability vital
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The realtors’ hopes for a rate cut were dashed as the RBI kept the repo rate unchanged for the 11th consecutive time, at 6.5 per cent.
Hiranandani expressed his concerns about India’s economic growth trajectory. “The recent RBI monetary policy announcement didn’t deliver the anticipated 0.50 bps repo rate cut, raising significant concerns about India's economic growth trajectory,” he said.
Puri stated that a rate cut would have helped boost housing sales momentum further, particularly since sales have tapered in the last two quarters. “However, the continuation of relatively affordable home loan interest rates will attract borrowers from this segment, especially since housing prices saw a significant rise in the last quarter,” he added.
In Q3 2024, according to Anarock, residential sales declined by 11 per cent, while new launches fell by 19 per cent compared to Q3 2023. Moreover, Shishir Baijal, chairman and managing director of Knight Frank India, informed that the growth in home loans has slowed, and consumption among lower-income groups has significantly decreased, as evidenced by the sharp moderation in sales of affordable housing.
However, the developers’ community remains optimistic about the stability that the RBI’s decision may bring to the real estate sector. Sector experts at JLL and Square Yards do not anticipate any negative impacts from the decision.
Pradeep Aggarwal, founder & chairman of Signature Global (India) Ltd, believes that the apex bank’s decision reflects a balanced and prudent approach, which may enable developers to plan with confidence and homebuyers to benefit from favourable borrowing costs.
Vimal Nadar, head of research at Colliers India, noted that a stable repo rate translates into stability in interest rates, which bodes well for the Indian real estate sector.
On the impact of increased liquidity on the infrastructure sector, Vaidyanathan Srinivasan, Operating Partner – Essar Capital, said a neutral monetary stance sends a strong signal of economic stability, which is vital for core sectors of the country. "This move supports steady financing conditions, enabling businesses to focus on executing large-scale infrastructure projects and advancing renewable energy investments. Predictable borrowing costs are essential for fostering growth and innovation in these capital-intensive sectors. As India continues to push for sustainable development and improved infrastructure, the RBI's policy ensures that the momentum in these sectors remains uninterrupted, contributing significantly to the nation's long-term economic goals," he said.
Dhanpat Nahata, Managing Partner of Essar Capital said the RBI’s decision is a timely and strategic move.
"Amidst heightened global uncertainties, rising energy costs, and fluctuating commodity markets, this monetary policy stance ensures financial stability and enhances domestic liquidity. The reduction in CRR might inject additional funds into the banking system, encouraging banks to lend more to corporates, particularly in critical sectors such as energy and infrastructure," said he.