A STEP IN THE RIGHT DIRECTION

The recent decision of RBI, not allowing the real estate loans, one more restructuring, is a step in the right direction. After collapse of Lehman Brothers in 2008, banks were permitted to restructure the real estate loans until 31-03-09. The real estate companies instead of reducing the prices held on to properties at high prices and earned substantial profits, when the economic activity picked up after June 2009. There are sectors still under pressure like textile, leather and handicraft, particularly SMEs in this sectors who deserve more incentives and stimulation. According to Assocham report - there is no bubble-like situation in real estate sector. It is the greed for more profit by real estate developers that is keeping the sector in temporary liquidity crunch. There is no reason to treat them at par with the farmers or the micro and small enterprises or even the large-scale industries, which are growth drivers of economy. The RBI decision, will force the developers to reduce their land/real estate holdings in order to clear/reduce bank loans/exposure, in time, to keep the credit ratings in tact. This will also helps the real estate prices to stabilize at realistic level.