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Demand for home loan low, real estate prices high

Demand for home loan low due to high real estate prices

Apnaloan.com Research Bureau

29 Jan 2008

Rising interest rates on home loans and an upward trend in real estate prices has led to a slack in the demand for home loans.

Real estate developers are expecting a rate cut from the Reserve Bank of India (RBI) to boost the housing demand.

The latest RBI data shows that the number of home loans in April-November 2007 fell 39% to Rs 32,424 crore from a year ago. Project loans to developers also eased by a fourth to Rs 12,563 crore.

Even in cities like Bangalore, Kochi, Hyderabad, Noida and Gurgaon where the real estate prices were rising high, prices have fallen between 5% and 10% in the recent times.

The festival season also didn't take off well for real estate in cities like Mumbai, Pune and Chennai.

Home prices surged over 200% in 2007. To curb the trend, RBI raised cash balance requirements four times to suck out cash from the system.