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Strong growth in small homes

Real estate may be a slump and banks may be licking their past wounds, but the shift to affordable housing – a win-win combination for cash-strapped realtors and first-home seekers, is bearing fruit. Mahua Venkatesh examines...

india Updated: Mar 25, 2009 22:48 IST
Mahua Venkatesh

Real estate may be a slump and banks may be licking their past wounds, but the shift to affordable housing – a win-win combination for cash-strapped realtors and first-home seekers, is bearing fruit.

Public sector bank executives say the demand for sub-Rs.20 lakh mortgages is reviving, with strong appetite in Tier II cities, where the needs are strong but budgets low.

Aided by government initiatives under its stimulus plan, home loan rates for the sub Rs 20 lakh level is below 10 per cent and that is aiding the trend.

While early last year, there was sound demand for home loans for upto Rs 1 crore with the real estate sector booming across the country, including the big metros, a change is now visible

Reserve Bank of India data reveals that credit towards housing in the April to December period of 2007-08 registered a growth of 14.6 per cent at Rs 31,780 crore while in the first nine months in current fiscal it is 21,989 crore, marking a deceleration of growth at 8.8 per cent.

Bankers suggest that since January, each PSU has given Rs 50 –150 crore towards the housing sector.

“After October last year, there no demand for housing loan but from January, things have started to look up,” JM Garg, chairman and managing director, Corporation Bank said.

Bank of Maharashtra’s chairman Allen Pereira pointed out that high net worth individuals, however are still wary of availing credit.

“Demand is definitely picking up and it is the middle class which is more open to credit. We hope to see a more vibrant credit growth in the coming months as sentiments are improving. However demand for loans upward of Rs 40 lakh is nil even today,” Pereira said.

“There is ample liquidity in the system and banks are ready to lend but until now there was little demand in the economy,” the official added.