Housing prices projects mixed trend

At a time of slowdown in real estate development, housing prices have more than doubled in three cities of Chennai, Faridabad and Bhopal in four years.

A National Housing Bank report released on Monday said three other cities Jaipur, Hyderabad and Bengaluru recorded fall in prices residential properties.

The Citywise housing price index, NHB Residex, incorporated in 2007 with a base of 100 said June 2011 quarter showed index for Chennai residential property prices have gone up to 248 from base 100 in 2007, which means property prices of metropolitan city surged 148 per cent during the period.

This is followed by city of Bhopal that has witnessed 124 per cent growth; Faridabad comes third with a rise of 120 per cent.

However cities like Jaipur, Hyderabad and Bengaluru have registered a downward trend with 36 per cent, 9 per cent and 8 per cent drop respectively.

“In India land policies have created distortions that have led to inordinate high prices in many key metro cities. In places like Mumbai and Delhi and some large metros, land constitutes 90 per cent of the cost of the house, which signifies we have wrong faulty land policies and with those land policies you cannot have a solution for affordable housing,” said HDFC chairman Deepak Parekh.

The report also revealed that total outstanding housing loans have been growing at a steady pace. While the growth was 21.71 per cent in FY11, it was 20.79 per cent in FY10. Housing finance companies had witnessed a decent growth of 16.12 per cent in FY09.

Meanwhile Reserve Bank of India (RBI) is advocating for inclusion of low cost housing loans under the priority sector-lending category. “We are trying to put housing finance for weaker section as part of priority sector. A committee is looking into it. Hopefully, by the first week of February this report will come,” said RBI deputy governor HR Khan on the sidelines of the conference.

Union Bank of India chairman and managing director MV Nair is currently heading the committee, which was constituted by RBI to look into various issues, related to priority sector lending. Proper documentation and due diligence standards are also under consideration to ensure that loans extended by banks are for the target segment, which need special attention and treatment, the terms of the report said.

The panel will also review current allocation mechanism for Rural Infrastructure Development Fund (RIDF) and other such funds.

“The apex bank is also trying to coordinate with government and market regulator SEBI for developing and broadening the corporate bond market. As much as 40 per cent of the total bank lending is for priority sector including agriculture and small sector industry,” added Khan.

Source: http://www.mydigitalfc.com/news/housing-prices-projects-mixed-trend-448