Housing feels left home alone

The real-estate sector, which had kept its eyes peeled for the stimulus, does not see any boost in government’s package.

The real-estate sector, which had kept its eyes peeled for the stimulus, does not see any boost in government’s package. The 4 per cent Cenvat reduction on all non-petroleum products will bring down steel prices by Rs 1,000 to Rs 1,500 which in turn may lower prices in the real-estate sector where steel is a basic input. But real-estate industry today vehemently said that the stimulus would not lead to that.

Moreover, the government has ruled out any interest rate subvention on home loans to boost the dampened housing sector. Planning Commission deputy chairman Montek Singh Ahluwalia, however, said that public sector banks might individually work out a package for home owners as the liquidity situation improves with cut in repo rate and reverse repo rate.

“With the RBI bringing down the cash reserve ratio (the amount banks need to keep with the RBI) the liquidity situation will improve. Interest rate cut will be a normal consequence of repo rate cut,” finance secretary Arun Ramanathan said on Sunday rejecting the idea of an interest loan subsidy.

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According to government data, only 20-25 per cent of all over housing loan requirements are met by banks. The rest of the money is provided by finance companies. Moreover, the government continues to maintain that 75 per cent of the housing loan requirements have an average size of Rs 7.5 lakh despite the rise in prices over the last two years and the special package being considered by banks for up to Rs 20 lakh will help boost demand.

The government seems to have shelved its plan to extend an interest subsidy of 2.5 per cent aimed at fixing home loan interest rate at 9.5 per cent. According to reports, the government was considering an interest rate subvention on new home loans which would, in turn, provide the stimulus to the housing and construction-related sectors such as steel and cement. The subsidy was being considered on home loans below Rs 25 lakh.