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Stage set for drop in home loan rates

The HDFC chief says property prices are likely to soften as developers in some areas like Gurgaon and Whitefield, Bangalore, are offering 10-15 per cent discount on prices, reports MC Vaijayanthi.

india Updated: Jun 27, 2007 22:02 IST
MC Vaijayanthi

Property prices are likely to soften and there are enough indications of that said Deepak Parekh, Chairman, Housing Development Finance Corporation (HDFC) at the company’s annual general meeting in Mumbai on Wednesday.

“Developers in some areas where there have been heavy construction activity like Gurgaon and Whitefield, Bangalore are offering 10-15 per cent discount on prices,” he said. Builders are also offering freebies, some even offering to pay six month’s EMI, which is a prelude to fall in prices, but still there is resistance to bring prices down in most markets, he said.

“Speculators have withdrawn from the market but real buyers have not withdrawn,” Parekh said. He said the Reserve Bank’s India has aptly plugged loopholes in foreign investment coming to realty sector in the garb of quasi-equity and it will lead to a correction in prices.

On the interest rate front Parekh expects the rates to stabilise and does not see a slowdown in home loan off take. “We don’t see a slow down yet. We expect a growth of 25 per cent in loan growth,” he said.

HDFC had dropped the home loan rates by a quarter percentage point for new home borrowers in a monsoon offer till July 15. It has been decided to extend this offer to cover the festival season, which witnesses new purchases, Parekh said.

HDFC is making a preferential allotment of 27.50 lakh shares to Citigroup Strategic Holdings Mauritius Ltd and 1.52 crore shares to CMP Asia Ltd (Carlyle Group) at a price of Rs 1730 per share to raise Rs 3114 cr.

HDFC would utilise this money to maintain its shareholding in HDFC Bank the current level of 21.56 per cent and also for investment in its insurance subsidiaries. Parekh ruled out merger of HDFC and HDFC Bank as well as ideas of creating a holding company for its subsidiaries.

Recently HDFC sold its 50 per cent stake in Intelenet, a business process outsourcing company to Blackstone Group. Parekh said HDFC got Rs 445 cr for the stake and their initial investment in the venture was Rs 134 cr.