NEWS & ADVICE : HOME LOANS
Real estate sector sees new project launches in the wake of festive season
By Joseph Samson
Oct 3, 2008
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The on-going festive is likely to see increased activity in the home loan segment. Even though property sales have been declining, real sector developers across the country are launching new suburban apartments to attract home buyers who had postponed their purchase. People will now run towards the banks to avail home loans in order to buy these flats.

The interest rate hikes and an increase in the amount of EMIs have seen more than 40% fall in home sales over the past nine months.

The banks have raised their consumer loan rates by 50-100 basis points following the RBI's move to raise the repo rate by 125 basis points. The central bank had raised the rate at which it lends to commercial banks in order to curtail soaring inflation rate.

All this had raised the average monthly installments. EMI on a Rs 10-lakh loan for 20 years by over 50 percent to Rs 12,740(14.25 percent interest rate) from Rs 8,060 (7.5 per cent interest rate) five years ago.

These moves have had an adverse effect in the project funding of the developers as pre-sales of flats has declined drastically. The developers have also been hurt by falling stock markets, increase in lending rates, ban on external borrowings.

Among others, which have limited their cash flows and execution capabilitiesRaminder Grover of Homebay Residential of property consultancy Jones Lang LaSalle Meghraj (JLLM) said, "Developers are launching the projects during Navratri and Diwali in the hope that there will be takers for new new flats after the shraadh period is over. However, we think Diwali will not be very exciting this time around due to poor market conditions.

"Though speculators have vanished from the property market, end user demand is very much there. On September 2, we launched our Muradabad project and within four days, we sold off half the project," said Neetal Narang, assistant general manager at Parsvnath Developers.

To enhance the sales the developers are also offering extra benefits such as stamp duty waiver and cash discounts, besides launching new projects.

For example, Sunil Mantri Realty has waived off stamp duty that amounts to 5 percent of property value, for the buyers at its Mantri Park project in Goregaon (East) in Mumbai. The developer is also offering 5 percent discounts in its projects in Bangalore and Gwalior.


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