There is scope for "some" correction in the country's housing prices owing to the pile-up of unsold units, and the apex housing finance institution -- the National Housing Bank (NHB) -- could partly incentivise the process through reduced refinance rates, according to the NHB CMD R V Verma.
Citing over-supply, Verma said the construction industry can take a project-specific or builder-specific approach to see how they can correct prices.
"Projects that are unsold due to the high price perception may see some price correction partly in the light of current downward revision in the housing loans," he told reporters here while announcing NHB's annual results for the financial year ended June 30, 2012. However, he did not give any specific timeline for such a correction.
"There is a psychology of over supply which will play out during the year in the form of price correction and becoming more market oriented," he added.
He said the NHB will plug the supply side gap by looking at reducing refinance rates, especially for those projects that promote innovative proctices in the design of the building, land management, usage of low-cost but durable material and the latest technologies.
Incidentally, banks including SBI, HDFC, ICICI Bank, Punjab National Bank, and Vijaya Bank have brought down home loan rates. NHB recently reduced its refiancne rates for housing loans up to Rs 2 lakh from 10% to 9%, and for loans of Rs 2-5 lakh from 10% to to 9.25%.
Referring to reports of inventory pile-up, he said measures are being taken by the NHB, the Department of Financial Services, Indian Banks' Association (a representative body of the banking sector), the Confederation of Real Estate Developers' Associations of India (the apex body for private real estate developers) to assess the extent of incomplete projects, whether the reasons for them not being sold are genuine such as the lack of credit flow.
He said it is learnt that many buyers are not making purchases due to the increase in prices and that the inventory was not being sold as prices are being maintained at such high levels.