The Reserve Bank of
India’s (RBI’s) monetary easing could prompt a rise in real estate demand,
leading to prices firming up after having dropped around 4% in the recent past,
said Mr. R.V. Verma, CMD,National Housing Bank (NHB), the regulator for housing
finance companies (HFCs).
Builders with unsold
stock may raise home prices, Mr. Verma said on recently.
“The Residex (index
of property prices in various Indian cities) for January - March could reflect
this trend. We are watching it closely,” Mr. Verma also said.
RBI cut the key
policy rate by 0..25% in its 29 January, 2013 review of monetary policy, and
analysts expect it to follow an easy money policy to boost economic growth.
Following the RBI
rate cut, several banks announced cuts in lending rates, fuelling expectation
of a pick-up in retail housing demand.
NHB also reduced its
prime lending rate (PLR), or the rate at which it it lends to other banks, by
0.25 % to 9.75 % .
The rise in demand
will be mainly in tier II & tier III cities where prices are still
affordable, said Mr. Verma.
“There
has been a position of oversupply, which has had a moderating effect on prices.
Prices are down 3 to 4%, primarily in tier II & tier III cities, because
this is where the demand for housing loans is concentrated under the slab of
Rs.10 lakh to Rs. 25 lakh,” Verma said.
Banks
have a about 67 % share of the housing finance market, estimated at Rs. 7
trillion as of 31 December. In the Trend &
Progress of Housing in India 2012 report released on recently, NHB said
the housing finance industry could see about 20 % growth in 2012-13 from the
previous year.
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