The Reserve Bank today said despite a steep fall in bank credit to the housing sector, which in turn brought down demand, house prices in some of the major urban centres have been on the rise.

“Bank credit to the housing sector came down to 9.5 per cent in FY13, from a high 13.3 per cent in FY08,” the half—yearly financial stability report of the RBI said today.

It said this was despite the fact that house prices in some metropolitan cities have witnessed significant increases in the recent past.

Calling for better and closer monitoring of the sector to stem any possible bubbles, the report said adding it is linked to as many as 250 sub—sectors, reflecting its crucial role in the economy.

On the positive side, the report notes that NPAs in home loan category have also fallen in the last three years.

It observed there was a growing tendency of completely up—fronting of construction finance by home buyers to developers in some cases and availability of construction finance to developers at rates on par with those for home buyers.

Indicating that housing sector needs to be monitored closely since there are indications that price to annual rent ratios in some parts of metros like Mumbai are as high as 50.

“In addition, there is also a need to develop indicators other than price and volume indices and credit to the housing sector to gauge the trends in and the overall health of the sector,” the report said.

The report said there is an urgent need to evolve new indicators like — the house price to household disposable income ratio, household financial obligations to household disposable income ratio, land price indices, index of construction costs, price to rent ratio and information on ownership of houses, among others.

Calling for more transparency in real estate transactions, the report said, such a step could help protect the interest of consumers and prevent money laundering.

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