1. Raghuram Rajan asks realty developers to bring down prices

Raghuram Rajan asks realty developers to bring down prices

Amid piling inventory levels of unsold houses, RBI Governor Raghuram Rajan on Thursday said the larger need is to push demand by a price cut by the real estate developers.

By: | Published: August 20, 2015 2:44 PM
real estate

It would be a “great help” if realty developers sitting on unsold stock bring down prices.

Amid piling inventory levels of unsold houses, RBI Governor Raghuram Rajan on Thursday said the larger need is to push demand by a price cut by the real estate developers.

With the piling inventory levels of realty players the controversial ‘teaser loans’ back into focus as the largest lender State Bank of India asking RBI to allow lenders to sell loans below the base rates.

“I think we need the market to clear. With growing unsold stock, we need to see the ways to do it. Some of it might be by making loans easier, but we also don’t want to create a situation where prices stay high at the level which means demand can’t pick up,” Rajan said at the SBI Conclave.

It would be a “great help” if realty developers sitting on unsold stock bring down prices, he said, adding that once the prices stabilise, more people will be keen to buy houses.

Echoing the need for developers to bring down prices, SBI Chairwoman Arundhati Bhattacharya reminded Rajan about the introduction of the teaser loan product, where it used to lend below the base rate or the minimum rate of lending, saying the product was able to revive demand in the days after the 2008 crisis.

“I am told that real estate stock is at two-year high and I was thinking if it is possible for a little while… could something of this (teaser loan) kind could be allowed given the fact that this is one of the portfolio where NPAs are the lowest,” Bhattacharya told Reserve Bank Governor Raghuram Rajan at a conference.

“In 2008 when the economy started faltering, one of the things that made demand go up was the 8 per cent housing loan that SBI did. Of course at that time it was tagged as a teaser, we in SBI refute that because the due diligence that went in for those loans are the same for other loans as well, even your eligibility was same as regular loans.

“Only thing is that for the first two years the customer is allowed to pay at a lower rate. What did happen was that demand really kicked in,” she said.

There was an intense fight between the RBI and the bank over this product and the then SBI Chairman O P Bhatt had gone to the extent of saying that the regulator did not understand the product.

Rajan said he believes that if real estate developers, who are sitting on unsold stocks, bring down the prices, that will be a very great help to the sector.

“Once there is a sense that prices have stabilised, more people will be willing to buy. I don’t know what the level is and if it is across the country. It is not clear that in some parts of the country, there is excess stock.

“I think we need the market to clear (the excess stock) and with growing unsold stock, we need to see the ways to do it. Some of it might be by making loans easier,” he said.

With PTI inputs

  1. S
    sudhir
    Aug 22, 2015 at 7:49 pm
    After long time India has seen a great economist i.e.Raghuram sir leading RBI. Inspite all the attempts by RBI, real estate prices have not come down & hence the NPA is at alarming level. Real estate lobby who has looted & still continue looting ordinary people. This loot is worst than loot by Britisher & Mohammed Gazni.Raghuram Rajan is doing fantastic job.Past experience is that inspite of reduction in interest rate,CRR & repo rate the benefits have not ped on to home buyers. So best thing people must stop investment in real estate & wait till actual prices come down.
    Reply
    1. S
      sudhir
      Aug 22, 2015 at 7:55 pm
      Raghuram sir ordinary people like me whose life time dream of buying a home not being reality due to huge price hike in real estate sector. Please donot reduce interest rate,CRR etc as neither banks nor real estate lobby doesnot p on any benefits to ordinary people. I have decided firm & spreading this message to all my friends. If due to any reason,Raghuraman sir reduces the interest rate despite no reduction in real estate prices & NPA, then people will understand what might have happened & they will be very sure that Achhe din kiske ayenge, Jab bhi wo kabhi ayenge?People have supported Modiji thinking that he will bring ache din to ordinary people & we expect he will remember this & act accordingly. Modiji Please donot force Indians to repent their decision.We want you to bring achee din to people sothat people will see you as PM till 2024.
      Reply

      Go to Top