RBI cautions on overheating Real Estate Market

Real estate prices have been continously going up over the last few months, in fact in some places i have heard that prices have gone up by 10% over the last three months.

The Reserve Bank of India in its last credit policy made some cautious remarks on the Indian Real estate scenario and has made changes in the way that real estate will get sold and loans will be sanctioned from banks/ housing finance companies ( HFC).

1. RBI has  asked for increased risk rating of all loans greater than 70L to 125% vs the earlier rates of 50- 100%. What this does is that it makes it less lucrative for banks and HFC. Now HFC basic aim is to give loans, so this typically should not affect them, however Banks is a different story. Mortgage lending is a small part of their overall business model.
What ever it may be, it will have a negative impact on the loan disbursement cycle for a lot of people

2. Loan disbursement amount fixed to a maximum of 80%. Earlier the banks used to have the flexibility of the amount of own money the buyer needed to bring to the table. Usually this was around 15- 25% of the purchase price depending on the credit review of the borrower. However with this being now at a min of 20%, it makes it even more difficult to buy a house ( Remember that the banks dont loan for things like, club house payments, parking , etc.- so actually it is more than the 15% one had to put upfront earlier)

 So while it is going on well, the economy is turning positive, the real estate sector is still quite heated- so tread carefully- its better to go for the ready to occupy property vs the to be constructed.

Happy Investing
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Realty- Is it the right time to get in?

Realty prices seem to have started moving up once again and it looks like the next few months are the right time to get in as an investment avenue if you have not done it yet.

Across most of the metroes there have been reports that prices are on the way up by around 10-15%. In the smaller towns prices have not yet picked and are not expected to pick up anytime soon.-- but hey if you want a house in a tier II city to stay-- this is great time to get in

A lot of new projects have been launched recently and I am finding that these projects are being lapped up very fast and in a few weeks there are no more flats available for purchase ( one such example where I was interested in was an amrapalli project in Noida).

Another thing that one can "see" is that some of the older projects where worked had stopped for some time are now in the process of giving possessions to their clients which means that cash flow problems and overstretched financials are slowly improving.

Interest rates are also on the way up-- the 8% scheme from SBI is valid only till the end of april and RBI has asked banks not to go in for any special schemes to drive home loans. So if you want to lock in your interest rates for the next couple of yrs-- this is the time to do so.

Happy Investing.