Lower Home Loan rates can Revive Real Estate Sector

November 25, 2008	(Be the first to rate this story!)  Loading ...
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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.

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