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Real estate cos ask for home loan at 7%

19th November, 2008

The Times of India

Real estate cos ask for home loan at 7%
The Times Of India
Prabhakar Sinha | TNN
New Delhi: Real estate players are not willing to cut prices of apartments and houses as suggested by FM P Chidambaram on Tuesday.
DLF chairman KP Singh said that prices have already been cut in the last one year as the industry was facing a slowdown. At present, the company has decided to defer implementation of projects in residential and commercial sectors, instead of lowering prices to increase revenues.
"In hotels, residential and commercial everywhere, the projects deferred because of lower demand and liquidity crisis," DLF chairman said. He said that high interest rates have affected the demand, adding that present pricing is competitive and linked to supply and demand.
Singh said government should ensure that home loan is available at 7% to prop up demand in the sector as many projects have been closed down by developers.
Parsvnath CMD Pradeep Jain, who is also the president of Council for Real Estate Developers' Association of India (Credai, Northern Zone) said that prices of on going projects have already fallen to an extent that the profit margins have reduced to single digit due to high inflation, which has increased the cost of construction by 25 to 30% in the last one year.
However, going forward, he said there could be some correction in prices if that of steel and cement go down. At the same time, the developers are constructing smaller size apartments with comparatively low-grade specification. Such steps will lower the per unit cost of apartments.
Jain said unless price of land comes down, the real estate price will not decline. If the developers would not be able to sell them at profit, they will shelve projects, which is happening all over the country now. He added that reduction in interest rates will help generate demand as it will help common customers. He said government should bring down the home loan rate to 7%.
Jain also demanded that banks should be asked to lend directly to realty companies with a moratorium on repayment for 18 months.
At the same time, the realty sector should be given the industry status, which will enable banks to lend to the sector easily. Jain said as the real estate sector creates demand for almost 200 industries, the government should give it due importance and accord it proper status.

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