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Business News/ Opinion / Online-views/  High prices, interest rates impacting housing credit: NHB
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High prices, interest rates impacting housing credit: NHB

High prices, interest rates impacting housing credit: NHB

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Mumbai: Demand for housing credit has been impacted by high prices and interest rates, National Housing Bank (NHB) chairman and managing director R.V. Verma told reporters on Thursday.

“On account of rise in prices of housing units we are seeing the impact of this price rise in two forms, one, potential buyers are choosing to stay away from the market in expectation that prices would come down," he said on the sidelines of the Skoch Summit.

“So, a large part of the inventory is building up, so demand has clearly come down."

NHB is wholly-owned by Reserve Bank of India (RBI), and provides financial services to the housing sector.

Weighed down by a piling up inventory as customers stay away, property prices in India’s key markets are slated to decline, while a divergent trend is likely in other cities.

In May, RBI raised key interest rates by a larger-than-expected 50 basis points to battle stubbornly high inflation, its ninth rate hike since March 2010.

Rising interest rates would likely impact the property industry that has had a harder time attracting bank financing following a spate of scandals over the past year and worries about business practices in the thinly regulated sector.

Verma urged developers to reduce price and “clear the market" of inventories.

“The way prices are moving up, if correction is going to come in, probably the situation will improve."

“If the prices are going to be just unidirectional, northward and inflation is clearly a concern, we see that demand may be affected, going forward," Verma added.

During the four years prior to the 2008 crisis, housing loan portfolio for housing finance companies grew 25%. In 2009-10, it grew 19%, and in 2010-11, it grew 16-17%, Verma said.

The lender has recently raised its prime lending rates to 10.5% from 10.25% earlier and has no plans to further hike rates as of now, he added.

The company, which follows a July-June financial year, has disbursed nearly Rs12,000 crore as of now, he said.

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Published: 02 Jun 2011, 02:11 PM IST
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