Housing loan demand may fall: NHB chairman

July 27th, 2011 - 5:57 pm ICT by IANS  

Kolkata, July 27 (IANS) The demand for housing loans may come down with key rates of the Reserve Bank of India (RBI) going up by 50 basis points, National Housing Bank (NHB) chairman and managing director R.V. Verma said Wednesday.

“There will be some impact. The demand for housing loans may come down, with the interest rates going up. Indian institutions have to take a decision on that as the policy rates go up by 50 basis points,” Verma told reporters on the sidelines of a programme organised by here FICCI.

India’s central bank Tuesday hiked its key rates by 50 basis points each in the 11th such exercise since January, 2010 to tame inflation, setting the stage for commercial banks to raise their interest on personal and corporate loans.

On the possibility of increasing the interest rate of NHB, Verma said, “We have to see this in the background of our overall cost of funds. Then we will take a decision.”

Stating that rising interest rates and an increase in the prices of property had already resulted in a slowdown in housing demand, he said the impact has been across all sectors in retail housing loans.

He said property prices in the country would see some correction now.

“In a situation where there is oversupply or unsold inventory, price correction is likely to happen. The price correction will be across the entire industry, particularly where there are large unsold stocks. About 15 to 20 percent price correction should happen,” he stated.

Verma said the NHB’s projected total disbursement for this fiscal was Rs.12,500 crore.

“We have to borrow about Rs.9,000 crore to Rs.10,000 crore for that during the year. We will borrow from insurance companies. There will be some external borrowings also. We are already in talks with the World Bank. We have applied for $500 million,” he said.

On setting up a mortgage guarantee fund, he said it should come up in this calendar year. He said the total provision of the fund will be Rs.12,000 crore.

“This is something we are already engaged in. This is a part of our ongoing discussion with the industry for the ministry of housing and the ministry of finance. It is in the final stages. We have already put infrastructure to manage the fund. A trust will be set up. The central government and some state governments will contribute,” he said.

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