Home loan rates may have peaked, according to Deepak Parekh, chairman, HDFC, the largest housing finance company in the country. Interest rates are linked to inflation and there have been signs that inflation is moderating, said Mr Parekh.
“Interest rates are linked to inflation. If inflation is controlled, interest rates can also be contained. In the past two weeks, we have seen from the data coming out that inflation has marginally tapered off. If the trend continues, it would mean that the peak has come already.
I think, with oil and commodity prices tapering off and food prices stagnating, we have peaked already,” said Mr Parekh. However, he added that there were some who believed that there would be one more round of interest-rate hikes.
Delivering the keynote address at the Ficci summit on real estate on Wednesday, Mr Parekh said that slowdown in the real estate market — a long overdue adjustment — was needed, and this, to some extent, has already happened. He pointed out that the real estate industry was still not out of the woods. “I do foresee some more pain in the real estate market in
Mr Parekh also had a suggestion to industry for avoiding situations like the one witnessed in Singur. According to Mr Parekh, the main problem in such cases is that land acquisition is done at fair value, but subsequently when project plans are announced, the value of that land escalates and then the original sellers feel cheated or disgruntled with their compensation.
“It is difficult to find outright solutions, but experience shows that the need of the hour is transparency in such land dealings, clearer land titles and making those losing their land stakeholders in the project.
Offering them equity in the project will give them long-term economic benefits, rather than leaving them with the fear of being displaced and then subsequently becoming the grist for someone else’s battle,” said Mr Parekh.
The doyen of the country’s housing finance industry was also critical of the move to extend higher floor-space index (FSI) for redevelopment projects in
The state government has been allowed to grant builders increased development rights as an incentive for redevelopment. According to Mr Parekh, higher FSI will result in building within five feet of one another. “Where is the open space? Where is the water? and how will the sewage system work?” said Mr Parekh.
He pointed out that some of the old structures had hundreds of dwelling units. And for rehousing, there was not enough space for redevelopment after everyone is rehoused.
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The rising bad loans are set to pose a huge challenge in the next few years for the banking and finance industry. Banks have already stopped or tightened lending norms for consumer finance and auto loans for fear of higher defaults. Rising interest rates have increased the possibilities of defaults, particularly among customers holding credit cards.Analysts say bad loans will be a major challenge for domestic banks even as regulators prepare to ease restrictions on foreign banks operating in India in 2009.Reserve Bank of India has no choice but to hike rates if inflation is at 12% and that will be a problem because if people have taken a loan of Rs 50 lakhs and paying 7% interest two years ago, now they are paying 14% which means paying double the interest now. This in turn, would lead to lesser number of people defaulting on their home loans in India because, unlike the US, the home-loans market in India is a “user’s market.For more view- realtydigest.blogspot.com
Has anyone done a short sale in Real estate? Let me know what the lenders are looking for. Anyway thanks for this great post.
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