As speculative activities in the realty sector will be tight after the establishment of a regulator, the housing finance companies will be hugely impacted, as said by RBI in their Financial Stability Report.
Earlier this year, both the houses of parliament have passed the Real Estate Regulatory Act (RERA) bill which is underway to be framed as the rule. RBI confirms that despite slight increase in the stressed advances in the retail housing sector, there is no need to be alert on ‘systemic risk’.
In the retail segments, the lenders have been focusing a lot on the high-value housing loans but credit demand is seen a general drop due to cheaper alternatives in the money markets and slow economic growth.
However, multiple reports, after demonetization hit, claims that realty sector may also experience an adverse impact of new RERA bill. Supporting this argument, all-India house price is observed to be increased by 7.3 per cent. Furthermore, NSE’s Nifty indice outperformed MSCI World and Emerging Market indices.
On the other front, the foreign investors started selling as the prediction of US Federal increasing rate by December is high. This caused the bond market to experience six months long rally. Foreign portfolio investors (FPIs) continue to give strength to housing finance in terms of equity, bond and currency markets, as well as domestic institutional investors have also risen. Despite that, FPIs’ net positions in Indian market are not observed as good.
Source: ET Realty