Cash Crunch in the real-estate sector

Following the global melt-down a liquidity constraint was felt by many sectors of the economy, including building/real estate sector. In order to ensure that this sector is not adversely affected the RBI took a number of measures to improve the liquidity constraints and to bring down the overall cost of credit. With reduction in the REPO rates, the scheduled commercial banks were able to bring down their lending rates to the housing/real estate sector. A Special Refinance facility ofRs.4,000 crore was introduced in December, 2008 to enable the National Housing Bank (NHB) to lend to Housing Finance Companies at reasonable rate of interest. Further more, in view of the difficulties faced by the real estate sector, exceptions/special treatment has been extended to commercial real estate exposures which are restructured upto June 30, 2009. There are several underlying causes of black money generation. The Government takes several punitive and deterrent steps which includes search and seizure operations, survey actions, scrutiny of returns, imposition of penalty and launching of prosecution in appropriate cases.