It could be the first sign of the end of the real estate boom. With the Reserve Bank of India (RBI) tightening fund supply to the real estate sector, home loan growth and property prices in key Indian cities are finally showing signs of a slowdown.

In the first six months of the current fiscal, home loan growth of India's largest home loan provider ICICI Bank has slowed down by 10 to 15 per cent, its home loan division CEO Rajiv Sabharwal said.

"Demand in Mumbai, Pune, Chandigarh and Jaipur has slowed down," said Sabharwal. "Builders are now resorting to discounts to sell stocks," he said. "This is affecting home loan business."

Though there will be growth over last year in value terms, overall growth rates may not match the same figures of last year. In the first quarter of the current fiscal, real estate loans had grown by 100 per cent over the same period in the previous year. RBI measures came soon after in its July quarter monetary policy when it hiked its short term interest rates for the third time this calender year.

RBI's swift measures to jack up interest rates and increase provisioning came as it was worried over the asset quality in the real estate sector. Not only builders, but home loan companies — citing festival season — are now offering close to half a percentage point discount in loan rates to attract customers. For example, HDFC, State Bank of India and ICICI have reduced their interest rates by half a per cent for the festival season.

... contd.