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Home loan interest rates: Real estate sector set to consolidate

Indian real estate sector, the growth of which has been constrained by rising interest rates and falling inflow of funds, is now set to consolidate, industry experts feel.

“For big developers there is no impact of rising interest rate but small players are finding it difficult to raise money for their proposed projects. They would need to sell their projects to big developers,” said, Ansal API Vice-President (Marketing) Kunal Banerjee, was quoted in a Business Standard article. Distress sale of projects is already happening, he said, adding the industry would witness more of it in days to come.

Seeking to check excessive capital inflows in real estate sector, the government last month decided to bar developers from raising money abroad to develop integrated townships.

Though tightening of External Commercial Borrowing (ECB) norms was related to only integrated townships, the spill-over effect is felt across the sector.

Besides, RBI has raised risk weights on housing loans, followed by interest rate hikes to curb demand in the sector.

Edelweiss Capital Senior Vice-President George Mathew was also quoted as saying that RBI is squeezing all sources of funds gradually to rein in inflation and a possible correction in this sector could be in the offing.

“Higher funding cost is expected to reduce attractiveness of real estate projects, reduce the land banking run and bring prices down,” he said, adding debt financing is not available for land acquisition.

Posted in Uncategorized, home loan, loan, home improvement loan, loan rate, home owner loan, interest only loan, mobile home loan, home purchase loan | Comments(0) July 2007



Banks cool off to home loans

Finally, the commercial banks have waken up to the home truths. Concerned over an ‘asset bubble’ on top of a recent warning from the RBI, commercial banks has slowly started going slow on the hosuing loan portfolio. In fact, they are working overnight to slow down their growth rates in the segment.

According to industry experts, housing loan portfolio of most of the public sector banks were growing by about 35% to 40% year-on-year. Recently the Reserve Bank of India (RBI) has asked the banks to focus on productive sectors like infrastructure, small and medium enterprises (SMEs) and curtail the credit offtake to unproductive sectors like commercial real estate, credit card spends, second and third housing loans, clean loans and personal consumption loans. The idea is have a check on the bad debts.

This has forced banks which have grown their home loan books significantly to restrict the advances to the sector. On the other hand, the hardening of interest rates have also slowed down the demand for housing loans as customers are averse to taking loans at higher rate of interest. They are hopeful of the rates moving southwards in the near future.

K Ramakrishnan, chairman and managing director of Andhra Bank said, “as such there are no problems with the credit offtake in the home loans. What has actually happened is that banks have suddenly started restricting their growth to 20% to 25% as against the 35% to 40% growth they had registered earlier. If a customer walks in for his or her first housing loan then banks extend credit. But if it is the second or third housing loan, then it is treated as a commercial deal and banks are hesitant to offer loan. The lull in the home loan segment is because the focus is slowly shifting to productive sectors from the unproductive sectors. At our bank, we will continue to lend to productive sectors but will go slow in the case of unproductive sectors”.

Posted in home loan, loan, online loan, fast loan, home improvement loan, quick loan, home owner loan, mobile home loan, bank loan | Comments(0) July 2007