Rating agencies and foreign investors do not see any impact on the prospects of the economy because of terror attacks in the financial capital. The meltdown in the global financial markets is still a larger concern.

Past experience has shown that markets have reacted only temporarily to such extraordinary events. Although some reports do not make a reference to the terrorist strikes, the event is likely to have been factored since the report includes India’s Q2 GDP numbers, which were released on Friday.

The Orissa episode of the Credai has decided to reduce prices of their forthcoming housing projects by 5-10% in the coming 2 months in the wake of fall in raw material prices.

The strategy comes close on the heels of a call given by Credai to more than three thousand of its members in the country earlier this month to reduce prices to revitalize the falling consumer demand.

The price reduction in the forthcoming housing projects by the thirty-seven developers of Credai, Orissa will be effective from January 2009 after full development plan of the city, prepared by the IIT, Kharagpur is expected to come into force.

Following the price reduction, the residential real estate projects in the city will be available in the range of Rs 2,200-Rs 2,400 per square feet as against the existing rates of around Rs. 2,500 per square feet.

According to the CDP of Bhubaneswar, prepared by IIT, Kharagpur, about 30 lakh people need to be accommodated in the city in coming twenty years, as against the city’s present population of about thirteen lakh. To accommodate thirty lakh people in the city, an area of 9,286 acres has been earmarked for residential purposes in the new CDP.

Addressing the media, Mohammed Moquim, president of Credai, Orissa said “Credai Orissa has decided to reduce prices of all the upcoming housing projects by 5-10% to bring more affordability to the end customers in the wake of slide in raw material prices and falling prices of land.”

Further hw added that land prices are predicted to drop further by about 20 to 25% in the coming months and in such a scenario, Credai, Orissa will announce an additional cut in prices for the real estate projects by about 15-20%.

John Abraham, who is the goodwill ambassador of Habitat of Humanity, received the money at a glittering ceremony here yesterday. The contribution, made by leading property developer ETA Star, is for Homes for the Homeless initiative and will be used to build homes for the needy.

Mr. Rick Hathaway, area vice president of Habitat for Humanity International, Asia-Pacific, was present on the occasion.

Union urban development minister Jaipal Reddy said that the government will soon make available slum lands in New Delhi for re-development. The government will follow the Mumbai model where land is auctioned to the real estate developers for building flats. Certain number of flats will be reserved for the slum dwellers at a minimal price. The developers can sell other flats to customers at the market rate.

“We are in the advance stage of finalizing the auction process in consultation with the Delhi development Authority (DDA). We would be ready with the guidelines soon,” the minister said.

The minister informed that the government is also taking suitable steps to increase housing supply for people in middle income group in the Capital. “We have asked DDA to construct large number of flats for middle class population living in Delhi. With land cost hitting the roof and the financial slowdown squeezing the paying capacity of people, the government would take all possible steps to release and develop large chunks of land into affordable residential apartments,” the minister said.

Mr Reddy also said that the urban development ministry is giving final touches to the long pending bill on real estate regulator. “It would be a model bill that would be mandatory for Delhi and a model for other states to incorporate in their state legislature,” he said.

Mr Reddy further said that while the government is trying to pep the dying sentiments in the realty sector, the regular infrastructure needs would also be given a very high priority. He informed that the Planning Commission is considering ministry’s proposal to inject more funds into the existing corpus of Rs 50,000 crore. “We have asked for an additional funding Rs 20,000 to take up additional projects under the flagship programmed of Jawaharlal Nehru National Urban renewal Mission,” he said.

The terrorist attacks on Mumbai are likely to further pull down the sagging property prices in the city, especially in South Mumbai. South Mumbai, the most expensive property market is expected to face a dip in value across all segments, including rentals, in the next half year.

“It’s is too early to say anything now. However, the attack would definitely be a dampener to the sentiment, at least in the initial few months. The attack may also create a ripple effect on the property prices in the suburban market,” Pranay Vakil, chairman of Knight Frank India said.

Many property consultants had already assumed that South Mumbai property prices would further appreciate, though marginally, in the second half of the year due to demand-supply mismatch. With the government taking measures to attract more foreign business in recent years, there has been consistent interest in establishing and expanding operations in India, thus leading to an obvious pressure on real estate, especially in South Mumbai.

Price is usually a function of demand and supply. The excess demand for properties had been pushing up the prices in this part of the city till recently. “The attacks would spread negative sentiments in the property market. New property deals will be very negligible in the next few months,” said a senior official with Birla SunLife’s real estate division.

“This draws a clear picture of the future of real estate investments and available opportunities.” He said his company’s presence at the show meant it could “take a detailed look” at everything related to the Indian market. Cityscape India 2008, to be held at the Bombay Exhibition Center from December 8 to 10, is expected to attract more than three lacs property professionals and international investors.

The company, which currently has a debt of Rs 8,200 crore, is also planning to rope in private equity funds for residential projects by March 2009. In addition, it will transfer Rs 1,200 crore of debt to its telecom joint venture.
Talking to Business Standard, Unitech Chairman Ramesh Chandra said the company would raise around Rs 1,500 crore from sale of hotels and commercial space. Besides, it will transfer Rs 1,200 crore of debt to its telecom joint venture and will also realise Rs 300 crore as debt repayment from the joint venture. Unitech had lent Rs 820 crore to the joint venture and given a guarantee for another Rs 1,200 crore.
“By January, Unitech will raise Rs 2,500 crore through these routes,” said Chandra. The company has also decided to sell its plots to schools and hospitals. The company has around 27 plots, mostly of five acres each, and another 15 plots earmarked for hospitals.
Unitech is aiming to divest three of its hotels projects that are nearing completion. Depending upon the success of negotiations, these projects may be divested by 2009. It is already at an advanced stage of discussion to sell Courtyard by Marriot, the 199-room budget hotel in Gurgaon, and expects to close the transaction before January.

According to the assessment of Assocham, over 20 million people in about 25 tier-II and tier-III cities, who want to purchase dwelling units, but had to back out on account of rising borrowing costs.

This, in turn, has compelled most real estate developers to defer projects, Assocham said, adding that the rising cost of raw materials like brick, cement and steel has worsened the situation for them.

In tier-II and tier-III cities, property purchases had registered a growth of over 25% between April and September last year.

Higher interest rates have also upset payment plans of borrowers, it said.

The chamber’s assessment is based on feedback from real estate members operating in cities such as Chandigarh, Meerut, Pune, Bhopal, Indore and a slew of smaller urban centres across the country.

Developers giving the feedback include Parsvnath, Omaxe, DLF and Unitech.

Citi has received US government guarantees of $306 billion, a cover that will help it sell the sticky assets and irrecoverable mortgages on its books, and a $20-billion cash infusion from the US Treasury, which is over and above the $25 billion it had received earlier.

Citigroup’s CEO Vikram S Pandit gets to keep his job, at least for now. However, the US government will get $27 billion of preferred stock, paying 8% dividend.

After the stock crashed last week, there were speculations that Mr Pandit will have to quit and Citigroup may be sold in parts. The biggest banking rescue deal was quickly cobbled together over the weekend before markets could further punish the scrip and paralyze the financial system. When trading resumed on Monday, the Dow was in the green. The European markets also cheered the state support for Citigroup and were up between 2% and 5%, amid expectations that president-elect Barack Obama will push for an unprecedented government role in reviving growth and stabilizing the financial system.

But many emerging markets, where Citi has a sizeable exposure, were more guarded in their response. Key Asian markets were down between 0.25% and 3%, while back home, Indian equities rebounded from their day’s lows on news of the Citi bailout package, but ended the day on a subdued note.

The distant shakeout in Citi is also creating ripples in India. Among the senior officials to quit in the past few days is Brian Brown, head of equities at Citigroup Global Markets India. Citi Financial, the group’s non-banking finance arm in India which has seen high delinquencies, will receive $200 million infusion by March.

“With the Rupee depreciating via-a-vis the dollar, NRI buyers stand to gain by around 20%. Prices too have begin to decline. NRIs can get a good deal now and we intend to highlight this,” Maharashtra Chamber of Housing Industry’s CEO Zubin Mehta said.

The Rupee had depreciated from the Rs 40 mark a few months ago to the Rs 50 mark against the dollar last week, a fall of over 20% in the span of a few months.

The Rupee depreciation against the dollar would benefit NRI purchasers by around 20%. Besides, prices have declined by 10-15% in the last few days. If discounts by builders are also factored in, buyers could be advantaged to the tune of nearly 40%, Mehta said.

“If a 2 BHK flat in a decent Mumbai suburb costs around Rs 50 lakh, it could be available to NRIs for around Rs 40 lakh. Factor in the price decline and if the builder offers a further discount or says the stamp-duty is for free, then the flat could be available for as low as Rs 35 lakh,” he said.

The MCHI intends to use the Rupee depreciation against the US dollar as a major selling point to NRI buyers. It would be a holding an exhibition in Dubai end-this month where major developers affiliated to the MCHI would be showcasing their properties.

“NRIs in the Gulf primarily look at ready property and these could now be easily available to them,” Mehta said. Mehta said that the main reason for targeting UAE NRIs was that they were mainly working-class people who have gone to Dubai and other places in the UAE with the aim of earning a living and buying a home in India.

“They are not permanent residents like in the US or the UK. They primarily earn their living in the UAE and buy a home in India,” Mehta said.

These NRIs have the money and are the actual buyers but are holding back on purchases hoping that prices would fall.

“In Asia Pacific, the financial market turmoil is starting to significantly affect the occupancy market for major financial office centres. Net leasing activity has been negative and vacancy rates have been on the rise for several quarters in Sydney, Tokyo, Singapore and Hong Kong,” JLL said in a latest report.

The consultant pointed out that rentals in Tokyo, Sydney and Hong Kong have already moved in downward phase of the cycle, with Singapore expected to follow suit in this quarter.

It has forecast that largest rental declines over the next one or two years are expected to be seen in the mature Asian markets following the demand contraction and the very strong rental increases observed in recent years.

JLL also noted that in the tier I cities in China and in some Indian suburban micro markets, the next two year will see abundant new supply hitting the market as demand begins to fall which would result in increased vacancy levels that could lead to major correction in rentals in short and medium term.

“In leasing markets where financial services companies contribute significantly to office occupancy and have driven rents to record levels, the increases now are beginning to reverse as the landlord-tenant power play shifts,” JLL said.

The report further pointed out that economic impact on real estate fundamentals are hitting more gradually in Europe than in the middle east and North Africa or Asia Pacific.

An association of developers, Confederation of Real Estate Developers Association of India (Credai), has asked member developers to reduce prices, but no one seems willing to announce any cuts.

“The government has imposed a number of taxes on the real estate sector. It needs to roll them back,” said DLF chairman KP Singh. He, however, didn’t make any commitment on price cut. “Prices are a function of demand and supply. Today, supply is far ahead of demand,” he said, adding that housing demand will pick up only after interest rates are brought down to 6-7%.

Most developers are banking on the possibility that the Reserve Bank will slash rates that will in turn bring home buyers back into the market. Many developers don’t think it is possible to slash prices.

Delhi-based Emaar MGF feels lower interest rates and an improvement in general economic sentiment are the answer to revive residential market, not price cuts. Emaar MGF managing director Shravan Gupta says several micro-markets across the country have already seen a correction of 20-25%.

“We have already cut prices, which have brought our margin down to 15% from 30% last year. If we cut prices further, our margin will get wiped out,” said Mr Gupta.

Parsvnath Developers chairman Pradeep Jain, too, feels prices are unlikely to come down, even though builders may focus on small-size homes to bring down overall cost. “The ticket size will get smaller for making homes more affordable. But per square feet rate will not come down,” said Mr Jain. He is the president of the Delhi chapter of Credai, which gave a call to its 3,500 members on Wednesday to reduce prices.

There is a wide spectrum of views among developers on price correction in the residential market. Even as Emaar MGF’s Mr Gupta says a price correction of around 25% has been seen in several micro-markets across the country, Mr Jain of Parsvnath says prices have remained stable. Another Delhi-based realty firm Omaxe CMD Rohtas Goel says prices have reached ‘rock-bottom’ by having corrected up to 40-50%.

The correction, developers say, is not with respect to the rates at which transactions were made in the past. “There is no benchmark to compare rates of new launches. We can only compare it with our estimates of prices, which similar projects could have fetched in good market,” says Mr Gupta.

Therefore, price correction, as mentioned by developers, remains debatable. Developers say price correction can be seen only in new launches, as old buyers will not allow builders to reduce prices in an ongoing project.

The company, which is planing to invest the amount in the first phase of the plan that will see development of 102 townships, is looking at both debt and private equity investments to raise the fund. The move by the firm follows consolidation of real estate business of the Sahara Group under it as the holding company.

“We plan to develop 102 townships in the first phase. The average project cost for developing townships would be 150 million dollar,” Sahara Prime City Head (Strategic Finance) Sandeep Wadhwa said. Asked about source of funding for the project that will spread over 100-300 acre, he said it was being done through sales, debt and promoters contribution but there is a gap of Rs 100 crore in each project.

“We will raise Rs 2,000 crore by 2009-10 fiscal as debt and private equity,” Wadhwa said, adding the company was in talks with banks, financial institutions and private equity firms. The company is open to selling stakes at both company and project level, he added. It is also in talks with global developers to form joint venture for townships development.

On initial public offer, he said the company would unlock value when market condition improves. Sahara Group had announced its plan to develop townships in 217 cities in 2004-05. It has launched nine townships where construction is in full swing and is planning to launch 22 more townships by middle of 2009.

Sahara Prime City has 20,000 acre of land, including 10,600 acre in Aamby Valley City near Mumbai.

Such an exercise enables banks to keep their non-performing assets (NPA) ratios under check and their books clean of the stigma of dud loans. But in a little-known directive issued earlier this year, the central bank has ordered that the moment a loan to a builder is restructured, banks must classify the account as an NPA.

However, for restructured loans in all other sectors, the account can continue to be treated as a so-called ‘standard asset’, thus sparing banks from having to make large provisions in their profit and loss accounts. The inability to restructure loans easily is forcing banks to put pressure on builders to cut prices, sell properties and service loans. Builders are usually left with little choice as an NPA tag will make it difficult for them to approach other banks for funds.

“We are putting pressure on the real estate sector to reduce property prices. In such times, even if they are able to keep their head above water, it would be fine. They have all had a good innings so far. Now, they have to learn to live with thin margins,” said TS Narayanasami, chairman & managing director of state-run Bank of India, and the chief of industry body — Indian Banks’ Association.

“Just banks reducing interest rates will not help in reviving sentiments; builders will have to bring down prices for buyers,” Mr Narayanasami added.

Bankers say demand for home loans has fallen because buyers are waiting for property prices to fall. “Banks have taken the initiative by cutting home loan rates. Prices of cement and steel too have fallen, but builders have not reduced property prices,” said MV Nair, CMD of Union Bank of India.

Although the RBI relaxed some bank lending norms for the building sector last weekend, it has remained quiet on the issue of restructured loans of builders.

Analysts have expressed concerns over the financial health of the real estate sector. City-based retail broking firm, India Infoline, fears the liquidity situation of developers could worsen further if banks refuse to refinance maturing debts of real estate companies and maintain the credit freeze on their accounts.

“We reckon that debt maturing over the next 12 months for developers like Unitech, Sobha and Puravankara is higher than our estimate of these companies’ revenues over the corresponding period. The situation with Omaxe, Parsvnath and Ansals also remains precarious, owing to large land advances and high receivables”, it said in a research note.

The building sector has seen a raft of credit downgrades amid refinancing concerns and bankers say the sector has little choice but to cut prices. “If a builder does not pay, banks would either initiate a recovery proceeding or restructure the loan. A recovery proceeding often results in lower realization. This, hopefully, should indirectly put pressure on builders to bring down price and go for negotiated sales,” said SA Bhat, CMD of Indian Overseas Bank.

Skyline Group also signed another contract for Frasers Hospitality to manage its other Bangalore property. Slated for opening in 2011, Fraser Place Hosur Road, Bangalore will have 153 serviced residences and is located at Bangalore’s “Electronic City” near the IT Park.
“Bangalore is India’s IT Hub,” said Skyline’s Group Managing Director Avinash Prabhu. “We are confident that the Fraser brand of luxury serviced apartments which has a loyal following in Europe, Australia and Asia, will appeal to the expatriate community here, as well as the well-heeled India businessmen and professionals in Bangalore on medium-term travel.”
A contract for Frasers Hospitality to manage a third Bangalore property has been signed with the Minerva Group. Fraser Place Whitefield, Bangalore will have 99 serviced residences located in the heart of the city’s IT hub of Whitefield, a well connected and self contained suburb, home to many multinational companies. The property will also open in June 2009.
India forecasts US$35 billion in foreign direct investment for its 2008-09 financial year, an increase of 42% compared to US$24.57 billion in 2007-08.
“Though these numbers will be impacted by the financial crisis, India will still see positive growth,” said Mr Choe. “This is impressive by global standards and India will still see demand for high-quality secure branded hospitality like Fraser especially among business travelers, our target market.”
All Fraser-branded properties provide five-star-type luxury combined with the space of an apartment, with separate living room, dining room and fully-equipped kitchen complete with clothes washer and dryer. In addition, residents can enjoy a full range of facilities, including all-day dining, business centre, swimming pools, fitness club, children’s playground and indoor playroom.

Responding to the request and interest shown by all section of buyers, TDI has brought in this scheme as a part of its customer friendly approach. Though the actual price of the apartments start from Rs. 68 Lacs, the scheme enables the buyer to own any one of these exquisite high rise apartments for as less as Rs 9 Lacs.

Launching the scheme, Mr. Kamal Taneja, Managing Director, TDIL said, “Launching this scheme for “Kingsbury Terraces” is just one way of bringing in more customer friendly and innovative approaches to serve our customers better. We will soon introduce many more innovative schemes for our other projects which will be of benefit to our valued customers.”

Owing to the location of the project in Kundli, the potential emerging hub of NCR, Kingsbury Terraces offer the best of world-class facilities and features. Residents of each of these Kingsbury apartments will have their select king size living space and style.

This is ensured by exclusive gated access, with the block sporting modern amenities like gymnasium, swimming pool, billiards room and community club to name the basic ones. Inter-flowing beautiful greenery and landscaping, State-of-the-art international standard elevations, terrace garden, four spacious bed rooms with hall, a separate servant room and balconies all around are a part of the world-class designs given to these apartments.

Sources at Unitech revealed that money from the escrow has been handed over to IBFSL on Monday. After this, collaterals that Unitech had pledged with Indiabulls to secure the debt will be released to the company. With this payment, the company does not have any outstanding debt towards IBFSL. Indiabulls founder Gagan Banga confirmed that Unitech has cleared its loan, which was taken 45 days back (early October) within the stipulated time.

“Unitech had pledged some flats and hotels against the loan,” informed Mr Banga. He, however, did not confirm the amount of loan that was raised. Unitech’s total net debt as of June 30, 2008, was around Rs 7,700 crore. Earlier this month, the company had put its 2,00,000 square feet commercial office building in Saket, New Delhi, on the block, which is expected to fetch upwards of Rs 600 crore.

Sources said that Unitech is also looking for buyers for its underconstruction hotel in Gurgaon, which is valued close to Rs 300 crore. Unitech’s stock has dropped from a 52-week high of Rs 546.80 on January 2 to a low of Rs 26.60 on October 24. Its shares closed at Rs 42.75 on the Bombay Stock Exchange, down 6.56% from its previous closing of Rs 45.75.

The overall slowdown along with the increased home loan rates has translated into gradual slowing down of sales in the real estate sector. Most real estate developers today are cash-strapped and are looking at avenues of raising capital.

With bank lending becoming tight over the months and private equity players getting overcautious, the only way out for real estate companies has been to monetise their assets. Market sources indicate that a number of such deals are in the market, but investor interest is very low at the moment.

“We are looking at divesting up to 100% stake in all six properties, comprising 1,000 rooms. We are also talking to a few private equity funds for this, but a deal hasn’t been clinched yet,” a top executive at Unitech’s hospitality arm told ET. He said the company had also scaled down its target for hotel business. Instead of 15 hotels with 2,500 rooms as planned earlier, Unitech has decided not to go beyond the 1,000-room capacity.

“We are proceeding with our hotel business as planned earlier. Six of our hotels are under construction. The first will open in January 2009. Unitech is in the business of developing properties and looking at monetizing its real estate assets. We are evaluating a divestment of equity at both individual assets as well as a group of assets. Depending on the price, we will be looking at minority or majority or outright sale in these assets,” Unitech MD Sanjay Chandra said.

Unitech’s first hotel project will be the 199-room mid-market property, which will be managed by Marriott and sport the ‘Courtyard’ brand. A person briefed on the matter said that Unitech was seeking a valuation of Rs 250 crore-Rs 300 crore for the property, but had been offered a lower Rs 200 crore by a private equity investor. He said the two parties may close the deal soon at the lower end of the band.

Other two hotels of Unitech, for which the company has management tie-ups with Marriott and Carlson hospital chains, will be ready in one-and-a-half years.

Mr Chandra had said that Unitech planned to build 35 hotels, including 15 in the first phase. The company expected to raise $350 million through private equity in the current fiscal for its hotel business. The global financial turmoil, however, has made fund-raising difficult for real estate firms.

With equity as well as debt becoming increasingly difficult to raise, a capital-intensive business like hospitality has taken a backseat for developers. Even DLF has shifted its focus from hotel and mall business to other segments where revenue realization is quicker and easier.

Considering the slump in the real estate sector with higher dips in demand for property and developers finding it hard to secure more land bank, which earlier was fulfilled with revenues generated from their projects itself, and increasing risk of rising NPAs of banks, the banking sector has come into focus once again.

The BSE Bankex was down 4.5% Monday at 10:38 am. The country’s largest private sector bank, ICICI Bank, fell 6.92% to Rs 368.55. It was followed HDFC Bank, which was down 6.09% to Rs 950, Axis Bank down 5.24%, Kotak Bank down 4.88%, Union Bank down 3.92%.

BSE Realty Index fell by 5.10%. Unitech was down 8.5%, Peninsula Lan falling by 6.11%, Indiabulls Realestate has fallen close 5.67%. Ansal Infrastructure was down 5.76%.

The benchmark Sensex was down by 2.6% to 9142.60.

Said Rahul Amritlal, an analyst with a CFP, “There is still concern left in the market with regard to trading considering the obscurity over global markets movement. We would see some respite after March-April period as the Assembly election proceeds. Till then, it would be range-bound activity as regards the Sensex movement.”

The government kick-started a series of “investment meets” last week in Muscat that had major Indian firms hard selling India’s economic stability to the diaspora.
The Muscat meeting, held under the aegis of the overseas Indian affairs ministry on November 12, is the first in over 16 such meetings to be held in the Middle East, UK and US.
These countries account for the bulk of the Indian diaspora. According to Col Harmeet Singh Sethi, head of the Overseas Indian Facilitation Centre (OIFC), the Indian government and business groups will target areas in the Middle East that remain largely ignored but represent big money including Sharjah, Dubai, Abu Dhabi and Bahrain.
According to Sethi, real estate, education and wealth management are key areas where India is looking for investment and support from the diaspora. One of the major obstacles in this area is the bureaucracy and red tapism. “We were told that India is rated the 83rd most difficult place to do business in. There were reservations expressed by business people there who are interested in investing in India but we were able to allay their fears to a large extent,” Sethi said.
The meeting included biggies like DLF, Career Launcher and Kotak Mahindra.
The investor tete-a-tete comes close on the heels of PM Manmohan Singh’s trip to Oman where he asked Gulf nations to invest in Indian infrastructure and help the country register 9% growth.
India is now looking at big-ticket investments in areas like infrastructure, healthcare, education, assisted living, wealth management and real estate.
Indians send the highest amount of remittances back home, beating even China. India has now captured one-tenth of global remittance flows with total remittances from overseas Indians growing steadily from $2.1 billion in 1990-1991 to $27.1 billion in 2006-2007.
But investment from the diaspora lags behind. Sources said the ministry of overseas Indian affairs was keen to convert this emotional bond into a financially productive one.

“We are not slowing down on any of our projects. Jaipur is rocking, Chennai is doing well, city-based projects such as Faridabad are also doing well,” Mahindra and Mahindra Ltd Executive Mr Arun Nanda said.

Fundamentals of real estate have not changed. Mr Nanda said, there were no funding issues for its projects and the company’s affordable housing projects are not going to disappear.

“We have actually got cash in the bank,” he said, adding there is a huge demand in Rs 30 to 40 lakh apartments segment. He, however, said the housing loan segment is facing problems and investors are not coming forward. “Demand has been put on back-burner and interest rates are hurting people,” he said.

Expectedly, several public sector lenders were first to follow the advise. SBI have lowered their prime lending rates to 13%. Bank of Baroda, Allahabad Bank, Syndicate Bank, Central Bank of India, Oriental Bank of Commerce and Corporation Bank have reduced lending rates by 75 bps to 13.25% with effect from November 10. Dena Bank cut its PLR to 13.5% from 14.25% and, among foreign banks, Citibank lowered its benchmark lending rates by 50 bps to 15% with immediate effect.

A source, who was present in the meeting, said the government accepted that real estate is an engine of growth. At a time when the economy is facing a threat of slowdown, the sector could be used to revive it. Chidambaram, it is learnt, told the delegation that the government will not only help infusing liquidity in the system, but will also work to bring down the interest rates.

In the last couple of years, realty has been affected adversely because of rise in interest rates, which went up from 8% to around 12%. The interest rate was increased because of the sharp rise in prices of real estate assets, which RBI thought could create a bubble. To discourage the price rise, RBI tightened the provisioning norms, making loans to the sector costlier. At the same time, in the last nine months, when the inflation shot up to cross 6%, level RBI started tightening liquidity to keep price rise under check.

Such a steep rise in the interest rates increased the equated monthly instalment (EMI) of a loan for the same period by almost 40%. This has affected affordability factor of buyers adversely and in turn brought down buying of houses. According to the source,FM said the situation has now changed and the policy would also be tweaked accordingly, so that the interest rate on home loan comes down, making it more affordable.

It is learnt that RBI is considering to remove the high risk weightage on the home loan to enable banks to lend at lower rates. At present, banks have to make provisioning of higher capital against the home loan of more than Rs 30 lakh. Because of this, the interest rate of home loan above that slab is around one percentage point higher than that of less than Rs 30 lakh.

Director of the company quoted that though the concept is still at a nascent stage, it is dynamic and fast catching up. The benefit of green concept is reduced environmental impact through energy efficiency.