The deepening economic slowdown, rising cost of living and low wage revisions, coupled with higher interest rares, are forcing salaried professionals who had earlier invested in properties to put them up for sale, say industry experts.
People who had invested in properties some 10-15 years ago are now finding it difficult to service their home loans which have become too expensive now due to the rising interest rates and falling rental yields.
According to a survey, resale inventory has increased nearly 30 per cent over the last six months.
“Economic slowdown has hit the real estate industry. Salaried professionals who had invested in properties five-six years ago to cash in on the boom, are now looking to sell them as they are finding it difficult to cope with the high cost of living,” property portal Housing.co.in co-founder and marketing head Advitiya Sharma told PTI.-from TOI
Category: Realty
The figures quoted for a South Mumbai building brings into stark effect the corrosive effects of inflation !
Full page Ads by builders = no negative coverage. For all the lamenting about dirty politics, who's blowing the whistle on the rot in media?
— Milind Deora (@milinddeora) September 18, 2013
Hat Tip Nooresh Merani
[gview file=”https://alphaideas.in/wp-content/uploads/2013/09/valuenomics-real-estate-2013.pdf”]
Nowadays newspapers are full of real estate ads which offer 80-20.In such schemes, the EMI on the housing loan availed of by the individual borrower is serviced by the builder during the construction period.
Well, guess what the RBI has just banned this practice.
The Reserve Bank today asked banks to link the disbursal of home loans to stages of construction to protect the interests of buyers and contain the fallout of “innovative” housing financing schemes.
“In view of the higher risks associated with such lump-sum disbursal of sanctioned housing loans and customer suitability issues, banks are advised that disbursal of housing loans sanctioned to individuals should be closely linked to the stages of construction of the housing project/houses…,” an RBI notification said.
Upfront disbursal “should not be made in cases of incomplete/under-construction/green field housing projects,” it said.
The notification follows the introduction by some banks of “innovative housing loan schemes” in association with developers/builders, where upfront disbursal of housing loans is made to builders without being linked to the various stages of construction.
Also, under such schemes, the interest/EMI on the housing loan availed of by the individual borrower is serviced by the builder during the construction period. These loan products, the RBI said, are popularly known by names such as 80:20 and 75:25 schemes.
The RBI said such home loan products are likely to expose banks and their borrowers to additional risks.
The risks include disputes between borrowers and builders; default and delayed payment of interest/EMI by the builder on behalf of the borrower, and non-completion of the project on time.
“Further, any delayed payments by developers/builders on behalf of individual borrowers to banks may lead to lower credit rating/scoring of such borrowers by credit information companies…,” according to the RBI notification.
The central bank said that in cases where bank loans are disbursed upfront on behalf of individual borrowers in a lump-sum to developers without any linkage to construction stages, banks run disproportionately higher exposures with concomitant risks of fund diversion.
As I had blogged earlier, the real estate bubble in India has peaked and is now deflating.