Borrowers in small cities to gain more?
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Bank officials say that unless builders focus on budget properties, the new housing package will not have the desired impact.
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— Photo: S. Ramesh Kurup
Expensive: Property prices rule high in the State.
The decision of public sector banks to cut interest rates for fresh housing loans will benefit borrowers in Tier III cities such as Kozhikode and their suburban areas, where borrowers can get an overall reduction in the loan amount.
Although Kozhikode has been impacted by the real estate downturn in a limited way, the housing market has slackened for the past few months.
Speculators have moved away and genuine buyers have stepped in. Most of the investors look for long-term benefits.
Affordable housing
Builders in Kozhikode look at the prospect of affordable housing.
The prices of land, steel and cement are either coming down or getting corrected. It is time developers went for affordable housing to rejuvenate the realty sector, says Nityanand Kamath, chairman, Calicut chapter, Kerala Builders Forum.
Property builders want a further cut in the interest rates — a 6 per cent rate for loans up to Rs.5 lakh and 7.5 per cent for up to Rs.20 lakh. “The housing loan ceiling should be increased to Rs.30 lakh if the new package is to be made more attractive,” Mr. Kamath says.
The Centre has come to realise that if the realty sector takes a beating, all other sectors will collapse. Now, the State government should take steps to reduce the excise duty on construction materials and decrease the stamp duty on registration. Already, the customer is burdened with service tax and value-added tax.
The stamp duty should be reduced from 13.5 per cent to 6 per cent.
Most States have complied with the directions of the Centre on this, he says.
Bank officials say that unless builders start focusing on budget flats and studio apartments, the new housing package would not have the desired impact in Kozhikode city.
The new loan package will be a boon for those planning to construct a house. Housing loan has become cheaper than it was a couple of years ago.
Thousands of existing borrowers who have opted for floating rates are charged 12.75 per cent now. In May 2007, the interest rate stood between 10.5 per cent and 11.5 per cent.
The banks increased the rate in various periods. Some public sector banks did so in July and August when the Reserve Bank of India took stern measures such as increasing the cash reserve ratio to check inflation that crossed 11 per cent. Currently, inflation has declined to a nine-month low at 6.84 per cent.
The middle and lower middle class segments will benefit from the new package. An interest rate of 8.5 per cent will be charged for loans up to Rs.5 lakh for a minimum period of 20 years. This will be applicable for the first five years. The margin has been reduced to 10 per cent, thereby helping the beneficiary to borrow up to 90 per cent of the value of the house.
After five years, borrowers have the option to go for fixed or floating rates. Another benefit of new package is that borrowers will get life insurance cover for the outstanding amount.
Banks say that the new policy will give a boost to the housing sector. It will have a multiplier affect in increasing the demand for steel and cement.
But whether the realty sector will benefit is yet to be seen considering the high prices of apartments and villas.
Even projects on the halfway mark are commanding high rates — over Rs.3,000 a square feet.
Private banks will be compelled to cut rates for housing loans.
But there is no guarantee that the rates will come to a low level, an official says.
EYE ON RATES
(Last week’s prices
in brackets)
CEMENT (per bag):
Kochi:
Rs.2
75 to
Rs.285
(
Rs.2
73 to
Rs.2
85)
BRICKS (1,000 nos.):
Kochi: Rs.5,700
(Rs.6,000)
STEEL (Per Kg):
Kochi:
8 mm TMT (ISI):
Rs.41.50 (Rs.42)
8 mm TMT
(ordinary)
Rs.37.50
(Rs.37.50)
10 mm TMT (ISI):
Rs.41.40
(Rs.41.90)
10 mm TMT
(ordinary):
Rs.37.40
(Rs.37.40)
(Regional variations in prices likely)
BIJU GOVIND
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