The association requested RBI Governor Shaktikanta Das to direct banks to pass on the rate cuts to non-banking finance companies (NBFCs) and housing finance companies (HFCs), which are the major source of funds for real estate developers.
In its letter to the Reserve Bank, CREDAI said that the central bank has taken various steps to infuse liquidity in the system during this current crisis, including reduction in repo rates and reverse repo rates and providing moratorium on loan repayment.
"The real estate sector, however, is not able to leverage the benefits of this reduction in repo rates," the Confederation of Real Estate Developers' Associations of India (CREDAI) said.
RBI has directed the banks to link floating rates on housing loans to external benchmarks, but the same is not made applicable to NBFCs and HFCs, it added.
"While the RBI has reduced 2.50 per cent in repo rates since January 2019, the maximum reduction passed on by banks to the borrowers has been between 0.7-1.3 per cent, largely from August 2019 till date. In some cases, however, no benefit of repo rate reduction has been passed on at all," CREDAI said in the letter.
Stating that NBFCs and HFCs are the major financing source for the real estate sector, the industry body said that because of these impediments, the industry is getting access to finance at much higher rates.
CREDAI said RBI should issue appropriate directions to banks to pass on the benefits of rate cuts to NBFCs/HFCs to enable them to lend to the real estate sector at a lower rate of interest.
Earlier this week, CREDAI also wrote a letter to Prime Minister Narendra Modi, recommending seven measures for survival of the industry during the coronavirus pandemic.
The real estate sector is facing a multi-year demand slowdown and has huge unsold inventories. The stress has exacerbated due to the coronavirus pandemic.
The sector got a breather from the over Rs 20 lakh crore economic package announced by Centre in the form of extension of interest subsidy scheme till March 2021, and 6 months extension for completion of existing projects.
However, the industry body has said that this is not enough and more needs to be done to boost demand. MJH RVK