Realtors say RBI move won't affect home loans

Source:Mail Today Bureau New Delhi, April 21, 2010



The real estate sector welcomed the credit policy announced by the Reserve Bank of India (RBI) on Tuesday.

The sector termed the central bank's move as balanced and said there will be no immediate effect on home loan rates.

"The RBI policy is balanced. It gives a strong message on inflation indicating a possible tightening of interest rates in the future. But it may allow infrastructure growth with measures on infrastructure bonds," Pradeep Jain, chairman, Parsvnath Developers, said.

"I don't foresee any increase in interest rates on home loans in the first quarter of the current fiscal as currently there is sufficient liquidity in the market. But definitely the banks will be raising the lending rates in the long run," he said.

"However, in the near-term, home buyers will not find interest rate as a stumbling block in their buying decisions. This is applicable to the housing loans as well, which is a relief measure for the realty sector," Jain added.

Another welcome step is a cut of five per cent in the substandard bank loan rates, which now stands at 15 per cent. This will help infrastructure companies to acquire more funds from banks, which will solve the longterm funding problems faced by the companies, he added The National Real Estate Development Council (NAREDCO) has also applauded the anti- inflationary stance of RBI in curbing prices of the major inputs in construction, steel and cement.

However, Rohtas Goel, president, NAREDCO, said, "At least the first-time home buyers should be covered under priority sector borrowing by RBI, with upper borrowing ceiling of Rs 30 lakh." According to Vidur Bharadwaj, director, The 3C Company, "The repo rate hike will turn funds costlier for banks, which might result in the increase in interest rates. But since home loan is an asset- based secured loan in a bank's portfolio, it may not see any immediate rise."

"The majority of home buyers choose a property based on their immediate requirements. So, a marginal rise in interest rate is not of much consequence to an end- user," he added.

The Bombay Stock Exchange (BSE) Realty Index advanced 3.08 per cent and BSE Bankex moved 1.53 per cent higher on Tuesday.