Latest Property News on 'Home Loans'

Property Market turns Buyer friendly

The year 2009 will lift the gloom in the real estate market as the property market turns buyer friendly with the cuts in property rates and home loan rates. Developers for their part would benefit as they will focus on creating volumes at affordable price points.

The government move to boost home loans will definitely rejuvenate the low-segment borrowers borrowing loans upto Rs 20 lakh. Public sector banks have made their loans cheaper and private banks and HFCs are expected to follow suit. “The important thing now is for the supply side to catch up with the increasing demand in this segment,” say experts. Read More »

Time for State Govt to Get into Act- Developers

Home loan interest rates are coming down but that is not enough. There is another major contributor to high costs of built-up space — the State governments, say developers. They have to do their bit — expedite clearances of project, bring down stamp duty and other levies, and so on — to ensure that prices come down to affordable levels. State governments should also look at rental options to ensure citizens have adequate affordable shelter in the urban areas. Also, it is up to the State governments to ensure affordable housing by setting clear targets and involving the private sector through public-private partnerships.

These views were expressed at a seminar on affordable housing organised by the Confederation of Indian Industry and the Confederation of Real Estate Developers Association of India, in Chennai. As for the definition of affordable housing, the seminar covered residential units ranging from a few lakhs to up to Rs 35 lakh. Industry representatives pointed out that State government taxes account for 35-40 per cent of the cost of built-up space. Project approvals could take up to two years that is a big addition to the cost of land as interest mounts. On the average, selling price of about Rs 3,500 a sq.ft, the government’s share of taxes and utility charges can go up to Rs 900 a sq.ft, they said.

HDFC Reduces Home Loan Rates

Interest rates on existing home loans (floating) have started coming down. HDFC, the leading housing finance company, kicked off a reduction in old home loan rates by cutting its retail prime lending rates (RPLR) by 50 basis points with effect from December 22. The advantage of a cut in RPLR would accrue to all the existing floating rate customers over the period of next three months based on their respective reset dates, it said. This’s the first time that interest rates for existing floating loans customers are going down after a series of cuts in key rates and ratios by the RBI recently. Other banks are expected to follow suit and bring down the rates soon, banking sources said.

The company has also announced a reduction in the rates for new customers as well. It has now created two slabs for new customers. Rates on new floating loans up to Rs 20 lakh slab have been cut by 150 basis points from 11.75 per cent to 10.25 per cent. Rates on floating rates above Rs 20 lakh have been cut by 50 basis points from 11.75 per cent to 11.25 per cent. Renu Sud Karnad, joint MD, HDFC Ltd, said, “We have been able to bring down our costs due to improved operational efficiency and good quality portfolio. As in the past, HDFC has ensured that reduction in the cost of its resources translates into a benefit in terms of lower costs for both existing and new customers.” Read More »

Government can Broaden Relief on Home Loans

When public sector banks had announced concessional interest rates on home loans on Monday, developers and huge sections of consumers were not too enthused, since the relief applied only to loans of up to Rs 20 lakh. Now, the government is considering a proposal to broaden the “differential” interest rate regime even on home loans exceeding Rs 20 lakh. Such loans may be split into two parts, where concessional interest will be charged on the first Rs 20 lakh and market rate on the remaining amount. At a meeting with Planning Commission deputy chairman Montek Singh Ahluwalia and finance ministry officials on Wednesday, real estate players demanded progressive slabs on interest rate for home loans. Realty representatives were of the view that banks should extend the relief on interest rate on home loans beyond Rs 20 lakh.

They suggested that banks could charge reduced interest rate of 9.25% on the first Rs 20 lakh and the exceeding amount could be charged at existing market rates. Real estate players, under the aegis of National Real Estate Development Council (NAREDCO), apprised Ahluwalia and other officials of depleting demand and liquidity crunch. They sought credit and increased overseas borrowings but the government made it clear that it would not tinker with the monetary policy again and again to restore real estate boom.”Monetary policy cannot be operationalised to restore real estate boom,” a senior finance ministry official said at the meeting. The real estate players urged the government to further cut interest rates on home loans and restructure debt of developers in order to boost demand in the sector. The developers made it clear that there was no scope to cut prices from the present levels. They argued that they were catering to those in metros with an income of over Rs 10 lakh per annum and affordable housing, according to them, was a flat costing Rs 35-Rs 50 lakh. Read More »

Home Loan Cut Benefits Tier 2 and 3 Cities

More than 80 per cent of India borrows home loans that are below Rs 20 lakh and it is this segment in the Tier II and Tier III cities that stands to gain after today’s interest rate cut by state-owned banks. Prospective buyers in metros will have to wait for banks to cut rates across the board or for property prices to plunge.Public sector real estate company National Buildings Construction Corporation Limited (NBCC) CMD Arup Roy Choudhury said, “The question to be asked now is whether the builder is ready to provide housing in this category.” He rules out the possibility of being able to provide affordable housing beginning at Rs 5 lakh stating sky rocketing land prices in metros and their suburbs.

“Rs 5 lakh is nothing. Even in Tier II cities, land prices have shot up in the last two years,” Chowdhury said. NBCC is trying to build affordable housing in the range of Rs 20 lakh to Rs 40 lakh in Delhi NCR region, Kolkata, Vizag and Kochi, he said.Real estate experts say homes in the price range of Rs 5 lakh to Rs 20 lakh are few in metros. The demand-supply mismatch in the affordable housing category — defined as homes costing not more than Rs 25 lakh — leaves little to celebrate for people living in India’s key metros. According to the Planning Commission, there is a shortage of 24.71 million homes in urban India, 99 per cent of which falls under the Economically Weaker Section and Low Income Group housing segment. Read More »

Indian Real Estate Market Requires Rate Cut

A demand for much cheaper borrowing for home loan customers is among a list of measures drawn up to help the struggling Indian economy.The Associated Chambers of Commerce and Industry of India (Assocham) unveiled a six-point strategy to get the country’s finances moving again.Interest rates for those buying property were singled out for special attention, with the trade body demanding cuts and other moves to increase the number of approvals for credit.Personal income tax should also be slashed by 10 per cent to improve consumer confidence, the group added.

“Interest rates for housing loans of less than Rs 15 lakh ought to be brought down at seven per cent to create demand and the government should facilitate a guarantee from the National Housing Bank for fresh loans for housing. Currently, lending rates hover between 13 and 14 per cent.” The proposed measures were outlined as part of a six-point scheme unveiled by group president Sajjan Jindal. Corporate income tax should also be cut by ten per cent, the plans say, and India’s Central Sales Tax should be scrapped outright.Last week Bloomberg reported the recent Mumbai terror attacks could prompt officials to take action to prop up confidence in the economy. The government could provide interest subsidies for housing, along with a raft of other measures, Bloomberg said.

Good News for Home Loan Borrowers

The government today said public sector banks would soon unveil a package for those seeking home loans of up to Rs 20 lakh. “Public sector banks will shortly announce a package for borrowers of home loans in two categories — up to Rs 5 lakh and between Rs 5-20 lakh,” an official statement said, a move that signals cheaper credit for buyers in the low and middle-class segments. The government said there was a large unmet demand for housing, especially among the middle and low-income groups.

It said housing would be kept under “close watch” and promised that additional measures would be taken, as necessary, to promote an accelerated growth trajectory. Housing is an important source of employment and generates demand for critical sectors. Analysts said the demand in the residential segment had declined in the last six months because of high interest rates on loans and a steep rise in property prices in the last two to three years. Read More »

Mid Term Drop in Home Loan Rates

After the high interest rate scenario over the last couple of years, the first signs of interest rate softening were seen in October when the Reserve Bank of India (RBI) announced sharp cuts in the repo rate and cash reserve ratio (CRR). Some rate cuts by almost every bank in all consumer loan segments have already happened. Now, there is a buzz in the market that more interest rate cut announcements are expected in the near term. Considering the market conditions, some rate cuts seem imminent in the near future. However, the government and RBI are playing safe. They are analysing the situation carefully rather than acting in a hurry.

Some factors influence the RBI’s decision on monetary policy. An analysis of these factors indicates borrowers can expect some softening in interest rates in the medium term. The global economy is going through a recession phase. There is a softening of prices in the global commodities market. Prices of all major commodities have come down significantly. Crude oil prices have come down to one-third of their peak prices quoted in March this year. Due to the global recession , foreign funds are withdrawing their investments from domestic markets to shore up resources to beat the global liquidity crunch. Read More »

Home Loan Interest Rates can Drop

Most banks have not reduced their prime lending rate (PLR) to the extent the Reserve Bank of India (RBI) has cut the rates. Therefore, analysts expect home loans rates will go down as more clarity comes on the issue. The government is exerting pressure on public sector banks to reduce their lending rates by reducing their spread. Once these banks reduce the rates, private banks are also expected to follow suit thanks to the competition. Liquidity conditions have not improved much even after cutting the cash reserve ratio (CRR), statutory lending rate (SLR) and repo rate. Foreign institutional investors (FIIs) are still taking large amounts of money out from the domestic markets. Experts believe that another rate cut by the RBI is imminent, and hence, it will result in lower home loan interest rates. The inflation rate has come down drastically during the last six weeks. This is another indication for the government and RBI to go for a softer monetary policy.

The GDP growth rate is slowing down due to lower demand and negative consumer sentiments. Lower rates will stimulate demand and result in better growth. Therefore, the industry and experts are exerting pressure on the government and RBI to cut interest rates. Many large manufacturing companies have announced a production cut. This will lead to lesser requirements of money from corporates. This will have indirect effect on consumer loans, including home loans. The demand for loans has reduced significantly due to negative sentiments in the light of the global slowdown. Banks are offering incentives such as lower interest rates to fresh borrowers. Many large countries are initiating moves to control the damage due to the global slowdown. Relief packages and lower interest rates are being announced.

Lower Home Loan rates can Revive Real Estate Sector

Reduction in property prices and home loan rates could boost demand. DLF, India’s biggest real estate developer, said a recovery in the property market in the next six months hinges on lower home loan rates to lure first-time buyers. DLF, India’s biggest real estate developer, said a recovery in the property market in the next six months hinges on lower home loan rates to lure first-time buyers. “Mortgage rates in India are at 12 percent to 13 percent, about twice what they are in China. That is unrealistic,” Rajiv Singh, vice chairman of DLF, said in an interview. “If rates are cut, the domestic demand itself will carry the country through this difficult period.”

DLF lost four-fifths of its market value this year as the highest interest rates in seven years sapped demand for homes and apartments. Finance Minister Palaniappan Chidambaram said this week there is scope for lower borrowing costs after two reductions in a month failed to unlock credit markets. “It’s tough to say if a cut in interest rates will change the sentiment,” said Hugh Young, who manages $2 billion for the India Opportunities Fund as managing director at Aberdeen Asset Management Asia in Singapore and holds DLF shares. “In the current environment, people in India will be wary of buying property and stretching themselves.” Real estate, automobile and steel companies have cut output and deferred projects to cope with a drop in demand in the world’s second-most populous nation. India has relaxed overseas borrowing rules and initiated a process to allow higher foreign ownership of domestic insurers to ease a credit crunch and infuse confidence.