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ECONOMICS ASSIGNMENT

ON
FISCAL POLICY AND MONETARY POLICY IMPACT ON REAL
ESTATE
Submitted by
Shashank Chauhan
A1!!"#1$%$
MbaReui
&hat is the M'neta(y P')i*y+++
The Monetary and Credit Policy is the policy statement, traditionally announced twice a year, through which the Reserve
Bank of India seeks to ensure price stability for the economy
These factors include ! money supply, interest rates and the inflation In banking and economic terms money supply is
referred to as M" ! which indicates the level #stock$ of legal currency in the economy
Besides, the RBI also announces norms for the banking and financial sector and the institutions which are governed by it
Fis*a) P')i*y+++
It refers to the Revenue and %&penditure policy of the 'ovt which is generally used to cure recession and
maintain economic stability in the country
Inst(uments ', Fis*a) P')i*y
( Reduction of 'ovt %&penditure
) Increase in Ta&ation
" Imposition of new Ta&es
* +age Control
,Rationing
- Public .ebt
/ Increase in savings
0 Maintaining 1urplus Budget
IMPACT ON REAL ESTATE MARKET:
In the above figure we see analyze the demand for real estate (residential ). In 2001 when credit were easily available for both the Developer and the customer
the demand for hou!n" tarted and rema!ned tron" !n 200#$200%.After 2005 the hou!n" demand &a at !t 'ea( )e*aue the CRR + REPO RATE
&ere ,e and the )an( &ere !n a 'o!t!on to ,end. In 200!200" starting this demand was at its pea#. No& !n 200- &hen the f!nan*!a, mar(et me,,ed
*r!! !t ,ed to the reer.e )an( h!(!n" )oth the CRR+ REPO RATE hen*e there &a a ,ar"e de*,!ne !n the demand for houe and also the prices came
down. $his trend continues in 200%!20&0 also' therefore this shows that how changes in ())' )*+,)A$* can lead to such tremendous change in demand for
one section of real estate. In 2010 the ent!ment re.!.ed and the *ommer*!a, )an( &ere no& a),e to "!.e more *red!t a *om'ared to 200- and hen*e
the demand for rea, etate / hou!n") )e"an to 'ur again with this the housing prices also came up. If there are no ma-or struggles in the ma-or economies
then this demand is e.pected to continue till 20&/ as far as above figure is concerned.
0ow we will see how the fiscal policy impacts the real estate investments.Infrastructure sector which acts as a catalyst in development of all the other sectors of
the economy has been the focus area of 1overnment. 2ully recognizing the need to fill the void in financing infrastructure pro-ects' last year3s budget had set up
a infrastructure debt fund. In the *urrent )ud"et' to augment low cost funds from outside India' a redu*ed ta0 of %1 has been doled out to foreign investors
providing debt to #ey infrastructure pro-ects such as aviation' power' toll road' bridge' port etc. $his will definitely help in filling the gap of the huge investment
the country needs in infrastructure. 2or analysis we will use the )ud"et of 2012$201# and &!,, ta(e ome (e2 'o!nt so that the role of fiscal policy can be
realized.
Con*,u!on 3 &a2 for&ard
India has huge 'otent!a, to attra*t ,ar"e fore!"n !n.etment !nto rea, etate. 4ith real estate reaching a point of saturation in developed countries and the
demand and prices falling' global real estate players are loo#ing at emerging economies such as India for tapping opportunities in real estate . Ind!an rea, etate
&!,, ta2 attra*t!.e due to !t tron" e*onom!* fundamenta, and demo"ra'h!* fa*tor.
5oreover' there is a high level of global uncertainty looming over the developed and developing nations of the world. 4hile developed economies are still
struggling to regain their growth momentum' developing countries including India and (hina are e.pected to grow at a reasonably high rate. In.etment !n
Ind!an rea, etate &!,, fet*h h!"her return for !n.etor a *om'ared to other ",o)a, mar(et. In the coming years' the opportunities in the real estate
sector will attract more global players to India and hence will help the industry to mature' become more transparent' improve management and adopt advanced
construction techni6ues.

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