Archive for February, 2010

A ‘plateau’ for property segment growth

February 11th, 2010

The year that has gone by belied the expectations of property buyers, mainly due to the reluctance of promoters to reduce rates significantly

The slump in the Indian property market as a result of the global economic meltdown was, in fact, a product of the year 2008.

Despite the revival measures implemented by the Union government and the Reserve Bank of India, such as reduction in interest rates and special treatment for loans up to Rs.30 lakh sanctioned to affordable homes, in real terms, the demand from buyers remained low throughout 2009.

At the same time, property development did take place, especially in the small segment.

The year saw Tata Housing, Godrej Properties and a few others going in for development of one-room apartments, especially on the outskirts of metros and in tier-2 and -3 cities.

Another trend was new marketing strategies such as offering modular kitchens and furniture to lure the low and middle income group.

We have seen plenty of ads projecting eco-friendly habitats, nil interest for the start-up period and longer/lower repayment schedules.

High prices

Prices remained high, mainly due to the reluctance of the promoters and developers to reduce the rates, maybe for reasons such as high cost of land paid earlier, cost of materials and labour and so on.

In Karnataka, one factor was the high level of ‘guidance value’ fixed by the State government about two years ago when property prices were at their peak.

Of course, there has been some talk in the State government corridors about revising the guidance value downwards in line with the market, but nothing has materialised so far. All said and done, 2009 was rather a ‘plateau’ for property segment growth.

Many authorities feel that the recession is almost over and the economy is looking up. Industrial indexes have gone up in a couple of months.

There is even a talk that it is time to withdraw the support measures provided by the government and the RBI. The recruitment activities reintroduced by some software companies also has given optimism of economic revival followed by sectoral growth. All these are likely to push up demand for housing in the first quarter of 2010.

News Published Under:  The Hindu

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IIA slams new building rules

February 11th, 2010

The Indian Institute of Architects have slammed the recent Government Order on amendments to the Kerala Municipal Building Rules, 1999, describing it as something that will sabotage the State’s development and adversely affect its economic development.

A recent statement from the institute said that it was with shock that the new notification was received by the community of architects.

Most of the revised rules were impractical and full of incongruities.

They were framed without consulting any of the stakeholders, such as architects, builders and the public.

One of the most striking feature of the Government Order was that about 80 per cent of the building permits could be issued only by the Chief Town Planner in Thiruvananthapuram, a return to the old regime, said Lalichan Zacharias, chairman of the Association, in the statement.

News Published Under:  The Hindu

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Floating rate: old borrowers take the hit

February 5th, 2010

If you have taken a home loan in recent years, you may be paying higher interest rates between 10 per cent and 13 per cent, whereas new borrowers are charged 8-8.25 per cent for the first two or three years and later on at around 9 per cent (as per prevailing rates then), which may be still much less.

Being a loyal customer who has been paying EMIs (equated monthly instalments) for the past few years, ideally the lender should have rewarded you by charging interest a notch less than that charged to the new customer.

The floating rate home loans are benchmarked to PLR (Prime Lending Rate) or Benchmark Prime Lending Rate (BPLR).

The PLR is defined as “the lowest rate of lending offered for the most preferred borrower and for such loans which are fully secured.”

A committee headed by Executive Director was formed by the RBI felt that there was much less transparency in fixing the PLR and it recommended to do away with PLR and introduce a base rate comprising of all cost elements which can be identified and are common across borrowers.

The committee recommended charging the same rate of interest for new borrowers as well as old borrowers under floating rate loans.

When it was expected that the woes of lakhs of home loan borrowers would end, the leading bankers aired their inability to charge same rate of interest for all borrowers old and new, under floating rate home loans.

The RBI officials clarified that since incremental funds have brought down average cost of funds for banks, why cannot they pass on the benefit to old customers.

Some bankers have expressed the fear that offering same interest rate for all borrowers may invite legal disputes as interest spreads (loans offered at PLR-2%, PLR -3% and so on) varied from customer to customer.

The RBI should help set right the injustice meted out to existing borrowers.

News Published Under:  The Hindu

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Posted in Real Estate

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