The Hindu Business Line : Priority status to boost housing demand

Mumbai, Dec 6 To facilitate credit flow into the cash-strapped real estate sector, the Reserve Bank of India (RBI) on Saturday announced several measures, including a refinance facility for the National Housing Bank and priority sector status for housing loans up to Rs 20 lakh.

RBI said the loans granted by banks could classify housing loans up to Rs 20 lakh given to house finance companies (HFC) as “priority sector” advances, subject to a ceiling of five per cent of their total priority sector target.

The General Secretary of the Builders Association of India, Mr Anand J. Gupta, said it was a welcome step though the Rs 20 lakh loan classification in priority sector lending would help their colleagues in II and III tier cities. The revamping of loans up to June too would help given the current scenario of depleted demand. Overall, the middle income segment stood to benefit.

Our Bangalore Bureau reports: Leading real estate companies, Sobha Developers and Puravankara Projects, while welcoming the reduction in repo rates announced by RBI, felt it was heartening to note the recognition by the central bank about the real estate’s immediate need for a quick revival through liquidity infusion and competitive interest rates.

Mr Ravi Ramu, Director of Puravankara Projects, said though the trickle down effect to banks to reduce the interest rates would take a few weeks, the recognition of the fact that real estate sector, particularly the mid-segment properties, also were facing liquidity crunch was notable. He said the special dispensation for treating loans to Housing Finance Companies as priority sector lending for houses upto Rs 20 lakh will increase the flow of funds to the housing sectors. “The Rs 4,000 crore refinance to the National Housing Bank to small units will give more funds to the banks to lend to buyers of houses.

Mr J.C. Sharma, Managing Director of Sobha Developers said the RBI move to make loans upto Rs 20 lakh cheaper and should revive demand and confidence among buyers of houses in both the mid and luxury segments.

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