DLF and Unitech stocks up for mortgage cut.

Real estate developers rallied after newspaper Times of India reported on Tuesday some banks were cutting home loan rates for new borrowers, sparking hope of increased property sales in the country.

DLF and Unitech rose about 1% each on the report, which said that lenders Canara Bank and IDBI Bankhad slashed these rates to attract new borrowers.

The reported moves sparked hopes other rival banks would be forced to match the cuts in the loan rates.

Home Loan Rate Should Be Restructured.

With speculations about the Union Budget 2012-13 already doing the rounds, city’s real estate industry too has voiced its expectations. Mainly revolving around increased subsidy on interest rate for loans towards affordable housing and industry status for taxation and construction and relaxation of FDI up to 51 per cent into multi-branding, the industry is hopeful of a favourable budget.

Sushil Mantri, president of CREDAI, Bangalore, says that “The Indian real estate industry was riding through highs and lows in 2011. Last year, one per cent interest rate subsidy was offered for loans towards affordable housing. If the subsidy can be broadened, home buyers especially in mid and lower income groups will benefit.”

“Indian real estate, especially housing needs the government’s support for further growth. The government should consider restructuring interest rates on home loans to attract larger base of lower and middle income group to benefit. For loan amounts lesser than Rs 25 lakh, the interest rate should be lower and should scale up as the loan amount goes higher,” said Sankey Prasad, chairman and MD of Synergy Property Developments Services.

Further the Experts demanded that the glaring concerns of the real estate industry be addressed.

“The real estate industry will be looking forward to RBI’s intervention to control inflation which has adversely affected the industry. If FDI is relaxed up to 51 per cent in multi-branding, this will boost the growth path for the Indian retail industry,” Sushil Mantri added.

Home Loan Rates Increases Tends to Increase Home Prices

NEW DELHI/MUMBAI: A 25 basis point rise in key interest rates by the Reserve Bank of India on Thursday is likely to further lower home sales across the country, some builders and bankers said in the midst of increase in bank rates. Customers will now have to reconsider the size and locations of houses they wish to purchase and many buyers are expected to put off their purchases altogether till home prices come down and rates stabilise. This is certainly bad news for existing home loan consumers as banks will certainly increase home loan rates.

Purchasing capacity had already gone down visibly during the last tranche of interest rate hikes, and we will see a further reduction in buyer interest. Owing to the last 10 rate hikes by RBI, EMIs for housing loans have risen 25 percent to INR980 per INR 1 lakh of borrowing, and consequently loan eligibility for homebuyers has declined by 20percent. Anil Kothuri, head of retail lending business at Edelweiss Group says, “Housing finance companies have no wriggle room available.” For new home loan seekers, this will be big warning, not just because of the rate hike but also because of the frequency of the rate hike by RBI. “The person who is looking to purchase a home has the option, of buying or not buying. Existing home loan customers are stuck. However, of the opinion of Renu Sud Karnad, Managing Director of HDFC, is that this quarter percentage hike will not impact housing demand and loan off-take.

Real Estate Industry In India To Reform

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Photo by Joe Athialy
Indian Real Estate Developers have fastened their seatbelts to come at par with their counterparts in other parts of the world. This has been started by the formation of new boards and committees which will include leaders from the Real Estate and Infrastructure sector of the country.

The move was initiated by RICS (Royal Institution of Chartered Surveyors) India.

The persons in the committee will mainly focus on developing standards and practices in the Indian Realty Market to increase the level of professionalism and transparency among professionals as well as bring reforms in policies for the benefit of people at large and overcome barriers obstructing the growth of industry.

The various challenges that have to be met are the currently fragmented and old legal system including the current laws on land acquisition, problems associated with Rent control laws, providing infrastructure facilities keeping pace with the speed of urbanization, lack of skilled professionals in the industry, among others.

As said by Sachin Sandhir, MD, RICS India, “As the mark of property professionalism worldwide, RICS aims to develop professional knowledge and standards in India and protect public interest through best practice regulation. We are pleased to be represented by India’s most established and respected professionals in this industry and are confident our new Boards and Committees will enable us realize this goal”.

An Agenda-driven conference on the issue saw participation from various Government bodies such as SEBI, National Housing Bank, Ministry of Corporate Affairs. Matters that were discussed were the need for valuation reform and the directions for future practices for the Real Estate Industry.