High property prices, rates keep home buyers at inlet

Potential home buyers are postponing their conclusion to buy a house due to high property prices and increasing interest rates leading to a slowdown in housing credit, said RV Verma, chairman, National Housing Bank.

The Reserve Bank of India's (RBI) sectoral bank credit data showed that the home loans outstanding of banks increased to Rs 3,53,338 crore on April 22 from Rs 3,46,110 crore on March 25, a marginal increase by Rs 7,228 crore with a growth of mere 2 %.

"Hike in property prices and rising interest rates are responsible for prospective home buyers postponing their choice to take a property loan. Credit is becoming dearer. People are waiting for interest rates to come down. A large part of the inventory is building up, so demand has clearly come down. Wherever there is excess supply, the price should be brought down and inventory should be sold in the market," said Verma.

In May, the RBI raised interest rates by 50 basis points for the ninth time since May 2010 to conflict high inflation.

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"If the prices are going to be just unidirectional, northward and inflation being clearly a concern, we see that demand may be affected, going forward," Verma added.

During the four years prior to the 2008 crisis, housing loan portfolio for housing finance companies grew 24-25 %. It fell to 18-19 % in 2009-10 and in 2010-11, it grew 16-17 %, Verma said.

NHB has recently raised its major lending rates to 10.5 % from 10.25 % earlier and has no plans to further hike rates as of now, he added. He said NHB which follows a July-June financial year has disbursed nearly Rs 12,000 crore, the highest ever till date.

Source: [mydigitalfc]