Sunday, January 4, 2009

Real estate developers expect more people to buy homes now to reduce cost of funds for developers and ease the liquidity pressure!

Real estate companies were facing a tough liquidity situation as home buyers deferred new purchases due to high interest rates and banks stopped lending to real estate firms due to fear of mounting defaults.

Experts are still sceptical of banks passing on the entire benefit of the reduced rates to their customers. “The RBI has cut rates in the past but we have not seen much from financial institutions. Only when home loan rates come down to 8-8.5 per cent, can we see some difference,” said Anuj Puri, chairman, Jones Lang LaSalle Meghraj.

External Commercial Borrowings:

Developers said the government’s move to allow external commercial borrowings (ECBs) in development of integrated townships was a big step. Hitherto, realty developers were prohibited from raising funds through ECBs as foreign funds were considered the main trigger for the rapid increase in property prices.

"If we can raise money abroad, it will supplement bank funds and customers’ money," said JC Sharma, managing director of Sobha Developers.

However, Hiranandani Constructions Managing Director Niranjan Hiranandani said the relaxation in ECB norms would not immediately help property companies as the liquidity situation abroad was tight. "Not much money is available in the international market. The benefits will come after a couple of months when liquidity improves," said Hiranandani.

"I expect more people to buy homes now. It will reduce cost of funds for developers and ease the liquidity pressure," said Ravi Ramu, director of Bangalore-based Puravankara Projects.
To read more, please, visit - Property firms see buyers back in market

Related Stories:

1) Urban development ministry calls for additional government measures, including cuts in home loan rates, to revive crumbling real estate sector

2) RBI cuts key rates to stimulate economy

3) Economists see robust growth in FY09

4) Return of animal spirits

5) Overseas funding to boost real estate

6) Indian Real Estate Developers to meet the RBI Governor to demand more sops for the struggling real estate sector

7) Credit flow to developers - RBI's interest rate cuts and the fiscal stimulus package do little to address the realty sector’s main source of trouble

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