×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

Costlier loans to hurt demand for housing

Costlier loans to hurt demand for housing
Comment E-mail Print Share
First Published: Mon, Jul 02 2007. 07 57 PM IST
Updated: Mon, Jul 02 2007. 07 57 PM IST
Recent hikes in lending rates and skyrocketing real-estate prices have combined to bring demand for housing to a standstill and may make housing less affordable for the middle-class, according to the Federation of Indian Chambers of Commerce and Industry (Ficci).
The industry group’s statement comes as analysts say that the market is starting to slow. Ficci said a slowdown in the housing market can have a big impact on the overall economy. “The construction boom is limited only to the metros and big cities and this cannot be the parameter for the central bank to make the loan price dearer,” Ficci said in a news release.
Ficci points out that construction activity needs to spread geographically and this needs to be supported by policy makers by providing loans at an appropriate price.
ICICI Bank Ltd., said the residential prices grew by 20-25% in the year ending March, compared to about 30-35% in the previous year.
Rajiv Sabharwal, head of retail assets for ICICI Bank, said that housing is becoming less affordable because of the higher interest rates and price escalation.
Housing Development Finance Corp. raised its key lending rates by 75 basis points to 14.25%.
On Saturday, ICICI Bank raised its floating reference rate for consumer loans, including home loans, by 100 basis points to 12.75%.
The rate hikes follow the central bank’s 25 basis point increase Friday in its short-term lending rate. Indian bank lending rates have jumped by about 300 basis points during the past year.
Sabharwal said real estate prices have stabilized in the last few months and have even started to drop in some places.
The Indian economy is less exposed to the housing sector than other economies. The ratio of housing loans to gross domestic product is 4% in India compared with 54% in the US, 57% in England, 14% in Thailand and 17% in China.
Reuters contributed to this story.
Comment E-mail Print Share
First Published: Mon, Jul 02 2007. 07 57 PM IST
More Topics: Money Matters | Personal Finance |