MUMBAI | NEW DELHI | BANGALORE: Gautam Belwal is not much of a movie buff. But these days, he spends most Sundays at his rented home catching some action flick or the other. His weekly searches for a two-bedroom house in Noida (in Delhi NCR) have come to an end due to soaring realty prices. And as if to add insult to injury, the youngster suffered a double whammy some weeks ago. The multinational IT company he works for doled out a below-par increment, dashing his hopes of buying a permanent home.
Sumit Joshi, director of Noida-based Real Credit Consultancy, a small firm that helps home buyers get loans from the big banks, reminisces about the days he would be flooded with calls from customers and bankers. Now, he is the one doing the chasing as buyers stay away and a banker client refuses payment due to unfulfilled targets.
Joshi and Belwal have little in common apart from being members of India's increasingly harried middle-class striving to either buy a home or make a living in the fractious, disorderly real estate market. But as prices rise, thanks to inflation and attempts at cartelisation by real estate barons in some parts of the country, and banks turn stingy and overcautious, people like Joshi and Belwal are finding their carefully laid out plans being blown away by this perfect storm.
"Our payments from banks are linked to certain disbursement targets we are struggling to meet because of very slow home sales. Where is the business today?" asks Joshi.Joshi has seen a 40% crash in business in the past eight months.
But he is not the only one. Across the country, home loan bankers are seeing a sharp drop in business as buyers rebel against high prices by staying away. According to a recent Knight Frank report, Indian real estate prices rose 12% in the past year, the third highest in the world.
Reserve Bank data shows housing loan growth slowed to 12.1% for the year ended March 2012 from 16% in the previous year. Also, before real estate prices peaked in 2008, big lenders were managing to grow their home loan portfolio at an annual average of 25%.
"Demand in metros has slowed down in April-May. This is mainly due to high interest rates, which have made buyers hesitant to buy property. There are also very few new projects being announced as builders' communities have been affected by high interest rates too," said VK Sharma, CEO of LIC Housing Finance, the country's third-largest housing finance company.
Loan growth at LIC Housing Finance slipped to 17% in 2011-12 from 28% a year ago, forcing the company to set a lower target of 20% for the current fiscal.
State Bank of India's housing loan disbursement grew 15% in 2011-12 against its target of 20%. The country's largest lender sanctioned Rs 28,000-crore of housing loans last fiscal.
"During January-March, there were hopes of business picking up, but April-May has been slack. Typically, this period is slower, but this time around it was slacker than last year. FY2013 has been quite disappointing due to both local and macro-level issues," said a senior official of SBI.
He also highlighted that there are markets like Mumbai, NCR and Bangalore that have unabsorbed supply, and in some cases, it is close to two years' oversupply.
But what is surprising in all this is that prices are showing no signs of coming down. Though consumers are shying away and there is enough evidence of this and volumes have dipped, debt-trapped developers are still not ready to reduce prices of apartments.
For the quarter-ended March, prices in the National Capital Region rose 33% while Mumbai and Bangalore posted 17% and 8% jump, a recent report from Liases Foras Real Estate Rating & Research showed.
Source:
economictimes.indiatimes.com
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