Interest rates likely to fall in coming weeks

NEW DELHI: Interest rates are expected to fall over the next few weeks after finance minister P Chidambaram on Friday expressed his "wish" that lending and deposit rates be cut by 50 basis points.

He also issued an "advisory" to chiefs of PSU banks to focus on lending to the consumer goods sector — both durables and non-durables — in a bid to prop up consumption and production, which have been dropping for the last few months.

"It is important to focus on both investment and consumption... There has been some sluggishness and that is why this advisory," Chidambaram said after meeting chiefs of public sector banks.

While the advisory is expected to make car loans and financing for purchase of consumer goods cheaper, what happens to home loan rates was unclear. Though the minister indicated that the need to moderate home loan flows was no longer required, he was not as candid on the issue. But the overall message was clear: interest rates need to dip.

"If monetary policy is also supportive, it is possible to look forward to stable, and perhaps some moderation, in interest rates," he said ahead of RBI's quarterly policy review.

With public sector banks, which account for nearly 7% of the market, cutting rates, private players would have little option but to follow suit.

Rents hit the roof in Hyderabad

HYDERABAD: House rents have seen a steep hike in the surrounding areas of Hi-Tec City. This is most visible in Madhapur, which has seen an almost 100 per cent rise in just one year.

Till last year rents in this part of the city were comparable to other residential areas in the city. But the last quarter of the year saw the rent graph heading north at a furious pace.

This phenomenon is not limited only to Hi-Tec City but also in most residential colonies in the Serilingampally circle of GHMC where rents have doubled in the last two to three months. In areas like Maszid Banda, which is three kilometres away from the Kothaguda-Gachibowli road, house rents have doubled in the last one year.

"In January 2006, a two-room house was rented out for Rs 1,800 per month. By August 2007, the rent had gone up to Rs 2,500. Just four months later, in January, 2008, the rent of two-room houses have skyrocketed to Rs 3,500," said Anand Bhattacharya, associate analyst at Datamonitor Plc.

Most of the tenants in these areas are software company employees who see no other option but to accept the hike. "In all the surrounding areas of Hi-Tec City the situation is the same. We don't feel the pinch as the rent is usually shared by roommates and corporate salaries are also reasonably high," Anand said.

He does not want to move out of this area as it is only a 15-minute drive to his work place. "The roads are wider and there are no traffic jams here."

At Guttala Begumpet in Madhapur, one has to shell out Rs 12,500 for a two-bedroom flat. "In February, 2006, a similar flat was available for Rs 6,500," said Prasheel Bhanpur, who works as a corporate communications specialist in Maytas Infra Limited.

"It costs Rs 6,500 for even a single room with attached bathroom. The rent for such a room would not have been more than Rs 3,000 only a year back," Prasheel said.

Residents link the increase in rents to the opening of two new restaurants and supermarket in the locality. "Two new restaurants and a supermarket have come up at the Kothaguda junction. Two petrol pumps have been opened at Gulmohar Park and Lingampally railway station," says S Bhaskar Yadav, who owns two houses in Kondapur. Earlier, not many people were keen on living in areas like Maszid Banda, Sudarshan Colony and Alind Colony. But now there is no need to even put up a 'to let' board, as software employees are willing to pay as much as Rs 12,000 for a two-bedroom flat in a new building with three months rent in advance, Yadav said.

GHMC collects Rs 10 per square metre as property tax at Madhapur and Kondapur and surrounding colonies. "If the house owner himself occupies the house, 30 per cent of the total tax will be waived. If the house is rented out there will be no exemption," said deputy commissioner, Serilingampally-I GHMC, P Nagamani. There is no rent control mechanism under GHMC's purview, Nagamani added.