Builders hope interest rates on home loans will reduce in coming 6-12 months

CHENNAI: The developer community is hoping for a home loan interest rate correction in the offing rather than a real estate price correction on account of demonetisation of 500 and 1,000 currencies.

Developers’ body Confederation of Real Estate Developers’ Association of India (CREDAI) has expressed the hope that the home loan rate would go below 7% in 6-12 months if the RBI cuts Repo rates by 2% when banks get an additional liquidity of Rs 15 lakh crore in the next few months.

“Securing a housing loan could become easy like in the west, where the home loan rates are below 5%. But unlike the west, India has a documented shortage of housing. This means that in the presence of a lower home loan interest regime, a larger pool of home buyers would avail themselves of loans to buy houses. This could be made possible in six to 12 months. The housing industry will start to grow at a rapid pace while concurrently being in compliance with transparency and fair practices like RERA (Real Estate Regulatory Act),” said CREDAI president elect Jaxay Shah.

Kalyan Kumar, a chartered accountant, said, “The demonetised currencies that do not get back into the banking system will ultimately become mere waste paper once the December end deadline gets over. But that does not prevent the government from printing new currencies to replace the entire lot of old demonetised currencies. It will make the government richer by a few lakh crores of rupees.”

On reports that there could be a correction in pricing of real estate assets, Shah said the industry has always been catering to the primary market, which comprises end users who avail themselves of home loans to buy houses, and hence there would not be any price correction.

K Sathyanarayanan, a city-based realtor, said, “Even with increased liquidity in the market, there may not be a price increase in the realty sector. Chennai residential market is primarily driven by white money. Only in pockets where there is involvement of huge amount of black money will the sector see a correction.”

Credits ET Realty

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