Despite of the measures taken to boost the flow of funds to the housing sector, credit flow remains stagnant.

As per the data released by the finance ministry, credit growth in the housing sector from November 7th, 2008 to January 16th, 2009 was only recorded at 2.29% as compared to an average credit growth of nearly 10% to 20% in almost all quarters before September 2008, when the financial turmoil took its toll over the globe.

The credit flow from the public sector banks has not grown at a desired rate even though these banks have slashed the home loan rates by almost 3% since October. As on September 30th 2008 home loan rates offered by PSU banks were seen at a range between 9.25% and 12%. These rates decline to nearly between 8.75% and 11% as on December 1st and further down in January and February. Despite of this fact credit flow to the housing sector did not rise.

At the end of December 2008, PSU banks had a total exposure of nearly Rs 162,500 crore as housing loans and all commercial banks in total had an exposure of Rs 2,71,683 crore as on December 19th, 2008.

Reserve Bank of India, finance ministry and the public sector has been continuously taking measures to augment the fund flow to this sector. In December the Indian Banks' Association (IBA) declared a special package for home loan borrowers on government's behest. Under this package all home loans up to Rs 5 lakh were extended at a rate of 8.5% while loans above Rs 5 lakh and below Rs 20 lakhs were offered at 9.25%.

Moreover IBA had also relaxed the norms for availing home loans. Even the benchmark prime lending rate (BPLR) has been reduced by up to 300 basis points by almost all the banks in order to facilitate cheaper loans to the customers. BPLR is the rate to which banks link all their retail loans and home loans constitute the major part of such loans.

Recently the largest lender, State Bank of India (SBI) has announced a special home loan scheme where interest rates have been frozen at 8% for a year.