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Demand for Housing Loans to drop in Chennai and other cities of India

Sustained growth in the housing sector may lead to a moderation in the housing sector. The main factors attributed to the impending moderation is the interest rate hike which in turn has triggered a rise in the price of Apartments in Chennai. The increased interest rate is set to hit home aspirants and potential investors in this segment alike. The factor discussed here is not just a one time increment of interest rate but a slew of rate increases for the past 1 year. This slew of increase has set worry in the mind of the middle class which feels that the EMI they are planning now may not be the same going forward.

SBI, the largest public sector bank in India has talked of its apprehension of housing loan demands hitting a slow down. Since the burden of EMI has gone up, home aspirants wanting to buy apartments in chennai have more adopted a wait and watch approach which accelerates this trend of slowing down.

UBI is also talking about a slow down. Their portfolio says it all. Against a 12-13% home loan growth rate last financial year, this year has seen the sector grow by just 10-11%.

One last factor that is also costing the growth of the housing loan sector is the rise in Chennai real estate prices. It is widely believed that a leveling of market price in this sector can provide some solace.

(from our Raindrops Correspondent)

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