Pune Realty goes in for a correction

April 5, 2008	(1 votes, average: 4 out of 5)  Loading ...
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Ostensibly, all seems hunky-dory and that’s exactly what the city builders in Pune keep saying. But scratch the surface, follow the trail to its origin, piece together seemingly not-so-related issues and the big picture begins to emerge, one that tells a different story.

To go back to where it all began, the US sub-prime home loan rates issue has already negatively impacted most exporters, especially the IT companies. Just as the realty boom, to a large extent, was powered by the IT sector, a slowdown there, it can be logically concluded, will also have a negative effect on the domestic real estate. In fact it already has.

To make matters worse, for IT sector where luxuries such as bench strength are a distant dream, the private banks are no longer lending at rates as low as 7.75 per cent but at around 12 per cent. In effect, while the salaries of IT companies have taken a down turn, the EMI liability for the borrower has gone up by nearly Rs 5000 per Rs 10 lakh loan.

For the banks these loan accounts, when the default period crosses 90 days, translates into non performing assets (NPA), which in turn will negatively impact the bank’s profitability, pushing the banks or even the borrowers to liquidate the property. This will give rise to a situation not unlike what hit the US real estate market about a year ago.

News Published Under:   Real Estate India, Pune |

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