RBI warns of spiralling prices of residential property

MUMBAI: The Reserve Bank of India has observed that residential property prices are shooting up in most of the major cities, especially in Delhi and Bangalore , while in Mumbai it seems to have reached a plateau.

According to the ‘Macroeconomic and monetary developments second quarter review by the RBI’, which was released recently ahead of the busy season credit policy tomorrow, while prices in Mumbai in the last three quarters have been showing moderate growth, in Delhi, prices have been marching ahead at a faster rate. The central bank believes that such a condition of soaring property rates was partly due to the activities in relation to the recent Commonwealth Games.

On the other hand, the report stated that the number of transactions in Mumbai, which had registered a sharp rise in Q3 last fiscal, seems to have reached a plateau. But housing prices in Bangalore, which were almost flat for the past 18 months, are showing some signs of increase.

On the financial markets front, the RBI maintained that growing risk perceptions and uncertainty in global markets have impacted domestic markets through two different channels – pressure for appreciation of the rupee and rise in equity prices due to sharp rise in portfolio flows.

Despite global market uncertainties, domestic markets functioned normally, with stable volumes and lower volatility. Transmission of higher policy rates were noticed in higher issuances of corporate debts, commercial papers as also higher yields on treasury bonds and Gilts and even in deposit rates.

The RBI noted that lending rates have also started to move up, with a lag. In the base rate environment, there have been signs of corporates increasing their dependence on the CP market. Banks have also used the CD route to mobilise bulk deposits.