RBI Calling for More Transparency in Real Estate Transactions

# Bank credit to the housing sector came down to 9.5% in 2012-13, from a high 13.3% in 2007-08

# House prices in some metropolitan cities have witnessed significant increases in the recent past.

The Reserve Bank  of India (RBI) recently said despite a steep fall in bank credit to the housing sector, which in turn brought down demand, home prices in some of the major urban centres have been on the rise.

“Bank credit to the housing sector came down to 9.5% in 2012-13, from a high 13.3% in 2007-08” the half -yearly financial stability report of the RBI said.

RBI said this was despite the fact that home prices in some metropolitan cities have witnessed significant increases in the recent past.

Calling for better and closer monitoring of the sector to stem any possible bubbles, the report said adding it is linked to as many as 250 sub—sectors, reflecting its crucial role in the economy.

On the positive side, the report notes that NPAs in housing loan category have also fallen in the past 3 years.

It observed there was a growing tendency of completely up fronting of construction finance by home buyers to developers in some cases & availability of construction finance to developers at rates on par with those for house buyers.

Indicating that housing sector needs to be monitored closely since there are indications that price to annual rent ratios in some parts of metros such as Mumbai are as high as 50.

" In addition, there is also a need to develop indicators other than price & volume indices and credit to the housing sector to gauge the trends in and the overall health of the sector”the RBI report said.

The report said there is an urgent need to evolve new indicators such as the home price to household disposable income ratio, household financial obligations to household disposable income ratio, land price indices, index of construction costs, price to rent ratio and information on ownership of houses, among others.

Calling for more transparency in real estate transactions, the report said, such a step could help protect the interest of consumers and prevent money laundering.

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