PSU banks rate cuts fall short of realtors' expectations | business | Hindustan Times
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PSU banks rate cuts fall short of realtors' expectations

Major real estate players gave a thumbs down to the announcement by public sector banks to cap interest rates at different slabs of housing loan, saying it was not enough.

business Updated: Dec 15, 2008 15:33 IST

Major real estate players on Monday gave a thumbs down to the announcement by public sector banks to cap interest rates at different slabs of housing loan, saying it was not enough, though they felt the step could spur demand in smaller towns.

"Rate of interests are still very high...There will not be many takers," DLF Group Executive Director Rajeev Talwar told PTI, adding the rate of interest should have been around 7-8 per cent.

"This package will give a miss to super metros, metros and Tier I cities, which are the major segments for demand drivers," they said.

Public sector banks on Monday announced that home loans up to Rs five lakh would be given at a maximum interest rate of 8.5 per cent, while those between Rs 5-20 lakh would be offered at 9.25 per cent.

Parasvnath Developers Chairman Pradeep Jain said, "The disappointing part is the rate of interest. We were expecting much higher cut in the rate of interest."

He, however, said low margin money and charging of no processing fee were welcome steps.

"For over Rs five lakh loans, we were expecting 6 per cent and between Rs 5-20 lakh we were expecting 7.5 per cent," he said, adding, "Overall it will give a partial push to the real estate sector, particularly in the affordable housing segment".

Airing similar views, Omaxe CMD Rohtas Goel said: "We were expecting more sops from banks for the housing sector... for loans up to 50 lakh, interest rates should have been 9 per cent and and for Rs five lakh, 5 per cent."

Unitech Ltd Managing Director Sanjay Chandra, however, hailed the package as an "excellent thing" that would boost realty sector.

"This will encourage developers to focus on affordable housing. Demand will increase in suburbs of Tier I and Tier II cities for homes costing around Rs 30 lakh," Chandra said, though adding "there will not be any tangible impact of Rs five-lakh loans category".

Unlike other developers, he described the interest rates announced by the Indian Bank Association as "reasonable".

Real estate consultant Cushman & Wakefield Executive Managing Director (South Asia) Sanjay Verma said, "This is certainly very positive. It will give a push on the demand side."

He, however, said it may not solve all the problems faced by the real estate sector at the moment.

"For me, the bigger concern is the lack of credit to developers for undertaking constructions. If this is not addressed to, then we may find a situation of demand-supply mismatch, which will cause inflationary pressure," Verma said.