Friday, February 09, 2007

Home loan's too hot for property buyers

Loan rate hike hits lower, middle income

Pune: Tejraj Parab, a service industry professional who has been hunting for a flat in Pune for the past six months, has postponed his plans. The prevailing home loan rates are way beyond his capacity, says he.

Sudhakar V., an IT professional, too has shelved his plans to buy property. "I'm rather comfortable staying at a rented place,rather than paying such a heavy price now for buying a flat."

"With the equated monthly instalment (EMI) on home loans going up every second day, it's beyond my means to go for a loan at this stage," Parab said, pointing to newspaper reports that rates on home loans may touch 11.75%.

Floating rate on home loans has gone up from 8-8.25% in the beginning of last year to 10.25%. ICICI Bank on Tuesday increased its floating rate to 10.50% and fixed rate to 12.5%, from 11.5%. This was a day after the finance minister requested banks not to hike home loan rates. Also, other housing loan institutions are expected to hike rates.

While property dealers in the city have admitted that many prospective buyers have decided to wait and watch, hoping prices of real estate would fall, builders and developers are upbeat.

"The increasing rates of home loans will not have any adverse effect on Pune's real estate," said P.A. Inamdar, former president, Promoters and Builders Association of Poona. The growth of the sector is spurred by the gap that still exists between low supply and high demand, particularly from IT professionals, he added.

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