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Teaser Loans Again? SBI Asks Reserve Bank to Allow Sub-Base Rate Loans

Mumbai: Piling inventory levels of real estate players in the country on Thursday brought the controversial 'teaser loans' back into focus, with State Bank of India asking the Reserve Bank of India to allow lenders to sell loans below the base rates.

"I am told that real estate stock is at two-year high and I was thinking if it is possible for a little while... Could something of this (teaser loan) kind could be allowed given the fact that this is one of the portfolio where NPAs (non-performing assets) are the lowest," Arundhati Bhattacharya, chairperson of the country's largest lender, told RBI Governor Raghuram Rajan at a conference here.

Mr Rajan acknowledged the demand, but did not appear very keen to accede and said that the larger need is to push demand by a price cut by the builders.

"I think we need the market to clear. With growing unsold stock, we need to see the ways to do it. Some of it might be by making loans easier, but we also don't want to create a situation where prices stay high at the level which means demand can't pick up," Mr Rajan said at the second SBI Banking and Economic Conclave.

It would be a "great help" if realty developers sitting on unsold stock bring down prices, he said, adding that once the prices stabilize, more people will be keen to buy houses.

Echoing the need for developers to bring down prices, Ms Bhattacharya reminded Mr Rajan about the teaser loan product, where it used to lend below the base rate, which is the minimum rate of lending. She said the product was able to revive demand in the days after the 2008 crisis.

"In 2008 when the economy started faltering, one of the things that made demand go up was the 8 per cent housing loan that SBI did. Of course at that time it was tagged as a teaser, we in SBI refute that because the due diligence that went in for those loans are the same for other loans as well, even your eligibility was same as regular loans."

"Only thing is that for the first two years the customer is allowed to pay at a lower rate. What did happen was that demand really kicked in," she said.

There was an intense fight between the RBI and the bank over this product and the then SBI chairman O P Bhatt had gone to the extent of saying that the regulator did not understand the product.

Mr Rajan said he believes that if real estate developers, who are sitting on unsold stocks, bring down the prices, it will be a very great help to the sector.

"Once there is a sense that prices have stabilized, more people will be willing to buy. I don't know what the level is and if it is across the country. It is not clear that in some parts of the country, there is excess stock."

"I think we need the market to clear (the excess stock) and with growing unsold stock, we need to see the ways to do it. Some of it might be by making loans easier," he said.

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Realty Trends

Home prices near most-affordable levels in over 30 years: HDFC


Home prices may have been on an upward spiral for many years, but the cost of owning a house in India remains near the most affordable level in over three decades, shows data compiled by mortgage giant HDFC Ltd.

The average price of a home, purchased with a housing loan, rose to over Rs. 45 lakh in the 2012-13 fiscal year -- marking the fourth consecutive year of uptrend from about Rs. 25 lakh in the year 2008-09, HDFC has said in a presentation.

However, factors like an even greater surge in the personal income levels, tax incentives and lower interest rates, have resulted into houses becoming more affordable to purchase, it said.

 

 

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India Property Investment Gyan

Major schemes for affordable housing to be modified: Girija Vyas


NEW DELHI: Major schemes meant for providing affordable housing to urban poor will soon be modified to make them more people-friendly, the government said today and invited the private sector to contribute more actively in this area. 

Speaking to reporters here, Housing and Urban Poverty Alleviation (HUPA) ministerGirija Vyas today said her ministry is modifying all the major schemes including the Rajiv Awas Yojana (RAY), Rajiv Rinn Yojana and the, Affordable Housing in Partnership scheme and added enormous budgetary support has been earmarked during the current plan period. 

Secretary HUPA Arun Kumar Misra told reporters that a fund of Rs 35,000 crore had been allocated to the ministry for the implementation of three major schemes, including RAY, which was being run in as a pilot project earlier under 12th five- year plan. 

He said the ministry would require approval from the cabinet for the implementation of these schemes and efforts would be made that through these funds 2 million affordable houses are encouraged. 

He said that in addition to the central government funds, banks and credit institutions would be providing funds for construction of affordable houses. 

Vyas said that with urbanisation, the number of urban homeless and area under slums had grown. 

Vyas said there was a need for private developers to develop economic models to foster affordable housing for economically weaker sections and lower income group households in urban areas as government efforts in this direction needed to be supplemented. 

Vyas also said a technical group, set up by her ministry, had shown that out of 18.78 million housing shortage in the country, 96 percent shortage is in EWS and LIG category and for this huge investments and private sector participation were required. 

Misra said the group set up by the ministry has suggested incentives for the affordable housing sector included concessions to development-related charges and service taxexemptions. 

It also sought direct tax rebates for affordable housing projects and inclusion of the sector in the 'infrastructure facility' he said and added the task force had felt that governments need to still provide direct capital grant support to affordable housing projects. 

Misra said that in the symposium held today where states, experts and private sector representatives were present, there was unanimity on many of the suggestions.

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Green Property- Eco Homes

Reclaim your city space: Projects in Delhi, Mumbai and Kolkata aim to transform lives

 
Three projects in three cities aim to transform the lives of people who live close by. The one in Mumbai hopes to transform a congested area into a green precinct; the one in Delhi converted an open drain into a walkway, while Kolkata hopes to bring the crowds back...