The government is looking at various ways to boost demand in the housing sector, especially in the wake of GDP growth rate dropping to 5.3 per cent for the third quarter of the current fiscal, with a serious look at boosting affordable homes that can generate demand.
It is also in talks with builders to devise ways to boost demand for housing.
Home loans have also slumped in the past few months, causing concern. Both as a social objective and as a means to sustain economic growth, housing is considered a crucial sector.
“We are exploring various ways to ensure that demand for housing picks up, one of which is pricing,” a government official who did not wish to be identified told Hindustan Times.
However, direct tax incentives to consumers at this juncture is ruled out. The proposal may be considered for the full budget, once the new government takes over after elections that end in May.
“The move would depend on the economic agenda of the party which forms the government though the issue is likely to be considered by any party which comes to power,” the official added. Growth in home loans has significantly decelerated in the current fiscal year, thanks to the uncertainty in the global and domestic markets. At the end of December 2008 in the current fiscal year, credit worth Rs 21,989 crore was directed towards the housing sector, lower than the Rs 31,780 crore
in the corresponding period of the previous financial year.
Meanwhile, public sector bank chiefs say they are willing to lend to consumers eyeing new properties. “However, there is very little demand and until property prices soften, it is unlikely to pick up,” said Allen CA Pereira, chairman and managing director, Bank of Maharashtra. Several banks have already reduced home loan rates and indications are that rates would further soften in the next couple of months.
“Once housing picks up, demand in other allied sectors such as steel and cement would also go up,” another bank chairman said.