P Chidambaram asks banks to put pressure on real estate developers to lower property prices
Aug 22, 2012
Source : The Times Of India

 

MUMBAI: P Chidambaram, the newly-appointed finance minister, has asked chiefs of government-owned banks to put pressure on real estate developers to lower property prices in order to get the economy moving. 
 
In a meeting held last Saturday with bank chiefs, the finance minister told bankers to impress upon builders the need to complete projects according to schedule and lower the prices of apartments that are ready for possession but not getting sold. 
 
"Builders are sitting on huge inventories (unsold apartments) which they are neither able to sell at the prevailing prices nor are they allowing others to buy by lowering the prices," a banker present at the meeting quoted Chidambaram as saying. 
 
The finance minister pointed out to the bank bosses that close to 5 lakh flats were lying vacant. "A huge quantum of capital is locked. Why are banks not putting pressure on them (builders) to lower prices since you have funded both the builder and the retail home loan borrower," he told bankers. 
 
Banks have lent close to Rs 1.2 lakh crore to builders while their home loan portfolio came to Rs 2.5 lakh crore in the last week of March 2012, according to RBI data. 
 
"Given the slowdown in the economy, builders should take a relook at the market condition and should effect some reduction in prices across the board — from premium to affordable. Builders should not expect only banks to lower interest rates on home loans to revive the economy, they too should contribute by lowering home prices which by itself would act as an additional stimulus to the economy," said S Raman, CMD of Canara Bank. 
 
"You must instigate borrowers to demand possession immediately or as per the schedule. You must also find out what is enabling builders to hold on to these vacant flats," said a senior banker quoting the finance minister. 
 
While no one opposed the FM's suggestions, some bankers stressed the need to put in place a real estate regulator to tackle malpractices in the sector, including lack of transparency about the size of the property or the date of completion of projects. Builders, however, appear reluctant to lower prices on account of what they described as rising input costs. 
 
"I don't think there's scope for a price cut given the kind of input and finance cost escalation we have already witnessed, unless we recover these costs along with requisite margin," said T Chitty Babu, chairman and CEO of Akshaya Home, a property builder. 
 
Property Prices Have Risen After Recession 
 
Chitty Babu is also the national secretary of CREDAI, a body that represents realty developers across the country. 
 
"Price rationalisation can be achieved only by means of enhancing availability of funds for projects and single-window clearance. Cost reduction of 10-12% can be easily achieved if the government decides to introduce single-window clearance," he said. 
 
Banks may have little leverage over builders whose loan accounts are regular. However, those builders seeking to restructure loans would be more amenable to pressure. 
 
India is among the few countries where property prices have actually risen after the recession of 2008 while major economies such as the US, UK and even China have seen an absolute reduction in property prices. Renu Sud Karnad, managing director of HDFC, the country's largest mortage lender, agreed with the finance minister. 
 
"The need to reduce prices is more in metros. And any effort to reduce housing prices and revive the realty industry will surely help in kick-starting the economy as the sector is linked with several other sectors." 
 
"We can only suggest and coax developers to reduce prices, we cannot force them. In the past, developers have cut prices and even now some are doing it indirectly through various schemes," she added. 
 
"Barring some metros like Mumbai and Delhi where land cost itself accounts for 70-80% of the house value, prices are still affordable in tier-II and tier-III cities." Bankers who attended the meeting said Chidambaram's intent was to revive sentiments. 
 
Giving an account of Saturday's meeting at a press conference afterwards, the finance minister urged banks to lower monthly payments on loans for consumer durables though he made no reference to the discussion on property prices. The UPA government, which is in the dock for alleged corruption scandals, is also faced with the challenge of reviving an economy in which growth has slipped to 5%, the lowest since 2003, while inflation remains stubbornly high at just below 7%. 
 
The government is keen to revive its flagging popularity among the influential urban middle class, which finds itself caught amid the triple whammy of higher interest rates, inflation and stagnant salary growth in most sectors. 

Latest Realty News

Subsidy boost for solar power systems in homes
Aug 21, 2012
BHUBANESWAR: If you are upset with frequent power cuts and increasing power bills, then go for solar energy. Opting for electrification through solar energy will not only ensure better electricity supply but also bring relief from load shedding. The Odisha Renewable Energy Development Agency (OREDA) is encouraging this option by providing subsidy for installing the home solar power system.
Just 5 percent target achieved under Indira Awas Yojana
Aug 21, 2012
Even as the Government has set a target to construct 2,86,090 houses under Indira Awas Yojana (IAY), the rural housing scheme for the poor, in 2012-13, only 5 per cent of the target has been achieved by the end of July. While more than one lakh houses were under construction, the annual target for the current financial year was to construct 1,55,419 more houses. However, only 14,995 houses h
CREDAI honors for ASI, Muttha Group
Aug 20, 2012
MUMBAI: Raising the bar of real estate awards, developers' apex body CREDAI has felicitated the Archaeological Survey of India (ASI) with the 'Best Maintained National Monument' award for their maintenance of the historic Fatehpur Sikri. At a star-studded and glittering award function held recently in Mumbai CREDAI also honoured the doyen of real estate, Shantilal Muttha, Chairman and Managing
Odisha Urban Infrastructure gets DFID boost
Aug 20, 2012
The UK-based DFID has come forward to boost the State Government’s urban infrastructure development endeavours by aiding the latter’s flagship development fund __ the Odisha Urban Infrastructure Development Fund (OUIDF) __ with a 25 million Pound sterling support. This is the second support coming OUIDF way after German banking group KfW’s 52.5 million Euro loan-cum-assistance earlier this mo
‘Cantonment Board of Ramgarh norms have stalled Ramgarh’s growth’
Aug 19, 2012
RAMGARH: The coal and garrison town of Ramgarh has failed to attract realtors despite its proximity to the state capital Ranchi. Even though the town has potential for real estate businesses, most have ignored Ramgarh due to Cantonment Board restrictions on construction of multi-storey buildings. The provisions of building by-laws of the Cantonment Board, which is a local civic body under the
Bus bays may start operating soon
Aug 19, 2012
BHUBANESWAR: Traffic problems created by city buses stopping in the middle of the road might end soon. As many as 21 bus bays are set to start functioning from September 1. "We will start using these halts from September 1 as the government is set to announce their readiness by August 31. From then on, we will not allow buses to halt at places other than these designated ones," said Nishikant Mis
Bengal realty lists growth hurdles
Aug 19, 2012
Calcutta, Aug. 18: Supply-side issues are creating problems for real estate developers in Bengal who are anticipating a flat rate of growth for the sector this year. “There has been an 18-20 per cent compounded annual growth in the last few years in the real estate sector in Bengal. This year we are hoping that we can maintain that kind of growth,” Harsh Vardhan Patodia, president of the Benga
PC pushes for affordable bank loans
Aug 19, 2012
New Delhi, Aug. 18: In a bid to boost the economy, finance minister P. Chidambaram today asked banks to cut interest rates and reduce EMI for durables as part of a strategy to push consumption-driven growth. “Consumers must be encouraged to buy more durables. I think the point has been well taken by the banks,” Chidambaram said after a review meeting with chairmen of public sector banks. “T
BMC area increase on hold
Aug 19, 2012
Bhubaneswar, Aug. 18: The Bhubaneswar Municipal Corporation (BMC) has decided to defer the move to bring 21 gram panchayats and two revenue villages under the civic body’s fold in the wake of mounting opposition. On July 30, the BMC council had proposed to bring the new areas within its jurisdiction. “The council only passed a resolution in the form of a proposal. We have decided to defer the
Complaint filed against public servants for irregularities in land allotment in Goa
Aug 18, 2012
Panaji : A criminal complaint was filed today against some public servants and private persons for cheating the state exchequer while allotting land to seven companies to set up Special Economic Zones in Goa. Mandar Shirodkar, deputy general manager of state-owned Goa Industrial Development Corporation(GIDC), filed the complaint with the Anti-Corruption Bureau of Vigilance Department against

Latest Realty News Of State

Realty Talk's