Revival or Escaping the Reality of Realty!

One of the biggest growth hurdles in real estate industry remains finance. Banks are unwilling to lend money to people without credit histories or proof of permanent residence. But few months back, National Housing Bank and the National Bank for Agriculture and Rural Development had agreed to provide funds to finance companies so that they can offer mortgages to such buyers. Such steps do help revival of the sector.

To reduce risk, buyers must put down at least a quarter of the purchase price and employers must confirm their income. Borrowers are then charged little more interest than those with an established credit history, hope this does not create another government sponsored subprime bubble in India, though its not really subprime loan (of US kind) when one needs to put 25% in down-payment.. Nevertheless, some cheer-up is good after you see flood water residing, as we did with a major revamp of our online realty media assets recently.

Broadly speaking, Indian real estate businesses are celebrating a revival of fortunes after plumbing the depths during the economic slowdown. Many realty firms have announced their plans to tap local markets for fund-raising and IPOs. Later if RBI tightens the lending norms to the real estate sector as it had done two years ago to prick a bubble, many realty firms may find the going tough.

To keep pace with the rising credit demands, banks are now announcing with new home loan schemes in this festival season like attractive low rates for initial years, schemes to switch over to either fixed or floating rates in subsequent years, etc. For example, Bank of India is tendering fixed rate loans for the first two years whereas SBI is offering fixed rates for the first three years. Competing with the other banks Canara Bank, Bank of Maharashtra, and Dena Bank are offering fixed rate loans for the first five years.

The lowest ever rate of interest of 7.95% on home loan, at least for the first year, has been offered by Development Bank of Credit. Bank of Maharashtra and Dena bank offer a fixed rate of 8% for loans up to Rs 30 lakh in the first two years, while Canara Bank offers 8% in the first year for Rs 30 lakh and SBI offers 8% for the first five years for loans up to Rs 5 lakh. This will definitely help lenders and the builders to push the home sales which are low.

Property 2009 real estate expo presented by MCHI and SBI at MMRDA grounds at Bandra Kurla Complex in the first few days claims to have received good response from home buyers. It offers property buyers a wide range of properties both budget, luxury and commercial properties along with a wide choice of Housing Loan options. Many real estate developers are showcasing their properties located in Mumbai and suburban areas, Thane, Navi Mumbai, Pune and other parts of India during the exhibition.

Many housing finance companies such as Leading Banks are participating in the exhibition. Some in this down-rated sector are becoming confident that such exhibitions, events, media statements, trends, etc can serve as another scapegoat for a bull-run.