MUMBAI: Residential property prices in India have a lot of scope for reduction as supplies are sufficient, a top RBI official said on Wednesday.
"I believe there's enough scope for housing prices to come down from the higher perch because of huge inventory piled up in several markets," SS Mundra, deputy governor of Reserve Bank of India, said while nudging builders to reduce property prices.
The unsold inventory across top six cities in India, including underconstruction and completed properties, currently stands at around 760,000 apartments as on June end as against nearly 734,000 apartments in the previous quarter, according to property research firm Liases Foras.
Mundra was addressing a gathering that included bankers and realty developers at the real estate banking conclave organized by developers' body, National Real Estate Development Council.
He stressed on reduction in housing prices while acknowledging that there can be a counter argument by builders that around 30 per cent of their realization is going towards taxes. "With more progressive construction practices and several other measures, it should be possible to make housing less costly than it is today," the central banker said.
Mundra went on to highlight that the housing shortage is accentuated more in the weaker sections. Over 58 per cent of people from the economically weaker sections and over 39 per cent from the low-income groups have no access to housing, Mundra said.
He also voiced concern against the practice of loans for a second and third house, adding the bank credit must be used for productive purposes and not for speculation. "We would not like to create a situation where bank finance is being used by a selected few for buying several houses as an investment and thereby creating artificial demand bubble," he said.