In a move that may make home and other loans cheaper, finance minister Nirmala Sitharaman announced that banks will soon launch loans benchmarked against the RBI’s repo rate.
While announcing stimulus measures to boost the economy, amidst concerns of a slowdown, finance minister Nirmala Sitharaman, on August 23, 2019, said that banks had agreed to launch loan products linked to the RBI’s repo rate. This is likely to ensure faster transmission of interest rate changes to home loan borrowers, among others. She added that banks will also pass on the RBI’s recent rate cuts to borrowers on the MCLR regime. Other measures announced, include additional liquidity infusion to the tune of Rs 20,000 crores by the National Housing Bank (NHB) to housing finance companies (HFCs), in a bid to ease the liquidity crisis in the sector. On the issue of stalled projects and other problems faced by home buyers, Sitharaman said that the government was holding consultations with various stakeholders and would announce measures in the near future.
Only 23 housing projects comprising 7,620 units were launched during April-June quarter under the subvention scheme, which has been banned recently by the National Housing Bank (NHB), according to property consultant Anarock.
Worried over frauds by builders, last month, the NHB asked housing finance companies (HFCs) to "desist" from offering loans under subvention scheme wherein real estate developers pay interest on behalf of home buyers for a certain period of time.
Generally, builders bear the interest till possession of flats so that homebuyers do not have to pay rent and their monthly installments together.
After the NHB directive, industry body CREDAI demanded a rollback of this decision as it would affect housing demand as well as liquidity of developers.
"The ban on subvention schemes will doubtlessly contribute to the sector's overall liquidity issues as players can no longer use them to attract customers. However, only a limited number of developers were affected by this move," Anarock Chairman Anuj Puri said in a report.
The NHB's directive was not as crippling as was initially assumed, the consulting firm said.
As per the research report, out of the total 280 projects launched in the April-June quarter of 2019, only about 23 projects (or 8 per cent) were marketed under subvention schemes.
These 23 projects comprised of 7,620 units – about 11 per cent of the total 69,000 units launched in the quarter.
"Our data also reveals that among the affected projects, those by larger players, strongly backed by financial lenders while offering such schemes, outnumbered projects by smaller developers," Puri said.
In city-wise analysis, Mumbai Metropolitan Region (MMR) has the maximum number of projects affected by the subvention scheme ban, with as many as 17 projects comprising 5,310 new units being launched under this plan.
Bengaluru came a distant second with just four new housing projects being marketed with subvention schemes.
Interestingly, both NCR and Pune had only one project each being sold under such schemes.
Kolkata, Chennai and Hyderabad had no new project launches offering subvention schemes.
"With subvention schemes off the table, developers will have to get creative with differentiated unique selling points to market their projects and boost sales. There seems to be no relief from the protracted pain the market has been experiencing in recent years," Anarock said.
Unsold housing inventory in Gurugram rose over 10 per cent during the last two years, in contrast to a decline in stocks in other parts of the National Capital Region (NCR), an Anarock report said on Thursday.
The report noted that the unsold inventory in Gurugram rose from 51,220 units in the second quarter of 2017 to 56,550 during the corresponding period of 2019.
"In the last two years, Gurgaon had the dubious distinction of adding 10 per cent to its unsold stock rather than seeing a decrease. In Q2, 2017, Gurgaon had nearly 51,220 unsold units (piled up further to stand at 56,550 units in Q2, 2019)," it said.
The report further said that in contrast to Gurugram, Noida had 27,000 unsold homes in Q2 of 2017 which decreased by 23 per cent to 20,860 units in Q2, 2019. Similarly, in Greater Noida, unsold inventories decreased by 26 per cent between Q2, 2017 and Q2, 2019, from 69,080 units to 50,810 units.
"Meanwhile, Ghaziabad saw its unsold stock decrease to 30,250 units in Q2, 2019 -- declining by 22 per cent in two years. Faridabad, having least unsold inventory in NCR (of 5,180 units) saw the stock fall by 27 per cent since Q2, 2017," it said.
However, Delhi saw its unsold stock pile up to 12,340 units during the April-June 2019, increasing by 4 per cent since the corresponding period of 2017.
Property prices in Gurugram are higher than those in Noida or Greater Noida. The report showed that the total value of the unsold units in Gurgaon (56,550 units) is nearly Rs 80,570 crore while in Greater Noida, the value of 50,800 unsold units is roughly Rs 26,720 crore. Noida's 20,860 unsold units are worth Rs 18,380 crore.
It indicates that the unsold properties in Gurugram largely belong to the luxury segment against affordable properties in Greater Noida, the report said.