Realty prices to fall 50%, says SBI chief

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: As the talks of demand slowdown in the real estate sector gather steam, one of the top bankers in the country on Saturday talked about price correction. OP Bhatt, chairman of State Bank of India (SBI), the country’s largest bank, expects 50% correction in the housing sector prices in the country. “In India we may witness up to 50% correction in pricing in the mortgage markets. If that happens, it’s good news for the Indian banking system as NPAs would reduce and new business would fall-in,’’ he said at the concluding session of Ficci-IBA Conference on Global Banking: Paradigm Shift, in Mumbai on Saturday.

Refering to the ongoing volatility in the stock markets, he advised not to overreact in the prevailing uncertain scenario where foreign funds are moving out of the country.

“There is a natural correction in Indian economy now. As regards to the fall in real estate as well as stock market, only 0.25-0.50% of the country’s population has lost money. That should not be the reason to panic,” he added.

Commenting on the inflationary scenario, Bhatt said he expected the inflation to settle down at around 9% by March 2009. “It’s not going to go down at 7% and also, not expected to shoot over the roof as perceived by some.”

He further said Indian banks have not really slowed down the credit inflow to certain sectors, but the genuine delay in providing loans to some of the sectors is mainly due to a huge backlog of loan applications.

However, Neeraj Swaroop, CEO, Standard Chartered Bank, India, said current downturn in India would continue and the year 2009 would bring more challenges to the India banking sector as NPAs would tend to rise.

Chanda Kochhar, joint managing director and CFO, ICICI Bank, said the bank would cut deposit rates only when the bank’s cost of funds go down.

“In the current scenario, Indian banks should prioritise liquidity and risk management over growth and profit aspirations,” she suggests.

Joydeep Sengupta, director, McKinsey & Compan said the overall impact of the global volatility would enhance the capital requirement of the Indian banking system, which will need $70-80 billion in the next four years to sustain the India growth story.