Mr. Arun Jaitely made a statement about why interest rates should be brought down. I find the whole argument humorous. With tremendous stupid laws RBI makes it necessary for us to go to banks for borrowing.
Let me give you an example. A friend runs a Geriatric Care center. Obviously most of the people who come there are over 75 years of age and need a lot of help. All of them keep their money in bank deposits ONLY – which means their money is lying with the bank at say 9% interest. My friend needs money to run the place – it does not make too much money, so the capex is bank funded. He gets money from the bank AT AN UNBELIEVABLE rate of 15%. This is the SPREAD that the SAME BRANCH makes.
Can my friend (unfortunately it is a limited company) borrow money from his guests? NO. RBI does not allow it. This was just one example. RBI will do whatever it takes to protect the margins of the banks – but beautifully call it investor protection…sounds stupid? well the Central Government is not much better.
Now by doing many such things RBI keeps interest rates at a level that it hurts the industry (as a borrower) and the lender (senior citizens dependent on bank interest). It has lent more than Rs. 400,000 crore into the Real Estate Business – and this helps the builders hold on to inventory for years – if not a decade. NCR has inventory for 83 months and Mumbai for 60 months. ALL THIS FUNDED BY YOU AND ME.
This means in India the ratio of Net take home pay : Cost of the house is so BADLY skewed in favor of the builder’s mafia – including some highly respectable names.
Now read what Mr. Kaul has to say about flat prices…So Mr. Jaitely either bring down RE prices or triple our salaries.
Post Footer automatically generated by Add Post Footer Plugin for wordpress.