Home loan rates may come down

While banks do not anticipate an immediate decrease in lending rates after the 150 basis-point cut in Cash Reserve Ratio by the Reserve Bank of India, real estate developers expect the measure to soften home loan rates for its consumers.

Demand for real estate property has decreased by nearly 25-30 per cent in the country over the last 18 months, when home loan rates soared from an average of 7 per cent to as high as 12-13 per cent.

“The home loan rate in India is among the highest in the world and we expect it to be reduced by at least 100 basis points after the cut in CRR,” said Pradip Kumar Chopra, Chairman, PS Group.

Abhijit Das, Regional Executive Director, JLL Meghraj, said, “The recent move by RBI is expected to enhance liquidity to the primary and secondary real estate funding, while arresting further de-growth in real estate investments in the country.”


Suspending loans

While banks had been reducing disbursements to the real estate sector over the last one and half years, the loans extended to “risky” projects dried up after banks fell short of liquidity, following the global financial crisis, said Sujit Kanoria, Managing Director, Shristi Infrastructure Development Corporation.

“We have temporarily suspended loan disbursements towards real estate projects,” said an official at the United Bank of India on condition of anonymity. The bank’s total loan outstanding with different real estate projects was Rs 2,500 crore as on March 31, he said.


Generating liquidity

The cut in CRR may now generate some extra liquidity to be extended to the sector, he felt.

“Our exposure to bank loans is only 5 to 15 per cent, making us less vulnerable to a liquidity crunch,” said Sushil Mohta, Director, South City and Merlin Projects.

Chopra said only rent-based commercial projects such as IT parks and shopping malls require bank loans, while funding for residential projects largely depend on advance bookings.


Pradeep Sureka, President, Confederation of Real Estate Developers Association of India and Managing Director, Sureka Group, said, “Banks are funding real estate sector with caution only after a project is sanctioned and construction has started. Time will say whether the cut in CRR will have any positive impact on the sector.”







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