Developers claims RBI’s new policy will reduce property investments

By Accommodation Times News Services

Real estate industry is currently witnessing many hurdles and crises, builders and developers are worried about the current market stability, which is sinking down and adding more complications in the realty market, Reserve Bank of India’s policy that banks should disburse loans in installments in coupling with the level of construction work completed. The realtors are claiming the RBI’s decision as a huge drawback for the real estate industry. According to them this will bring negative emotionalism in the mind of the developers and buyers, which will result in more slowdown of the transactions.

As per the 80:20 scheme the buyers need to pay 20 per cent of the property price and remaining 80 per cent were been paid by bank to the builder, lending as a bank loan to the buyer. But, as per the new policy the buyer has to pay 20 per cent as the booking amount and remaining amount banks will pay to the builders as per the stage of constructions. This will result in to lack of investment and financial crises for the builders and developers. As if the real estate sector is facing liquidity crises.

“This decision has come at a time when the home interest rates are already very high and the property prices have increased due to escalating cost of raw materials; it will add to the woes of the customers. The common man’s chance to own a dream home with minimum investment will be affected” said RK Arora, CMD, Supertech Group.

This will affect the buyers and developers both and widely to the buyers. This will result in reduction in the number of investors in the sector, as buyers will lack with the investment money and it may also leave many projects in lurch due to lack of finance with developers to complete the construction, as it will be difficult for them to acquire investments.

“Statistics says that nearly 25% of loan disbursements for the new flats in Mumbai are under such schemes. There have been reactions coming in way as it’s obvious that the developers are against the notifications. It’s ironic that the government believes the middleclass, which avails of loans to buy its dream home, to be a risk, but not the five major industrial houses that, between them, have an exposure of Rs 5 lakh crore of public money. The RBI obviously thinks it is extremely important for it to stifle the economic growth of a company by taking such decisions,” said Vimal Shah, managing director of Hubtown and president of the Maharashtra Chamber of Housing Industry.”

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