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Property prices in TN stabilising: Sundaram BNP Paribas Home Finance


Real estate prices in the Chennai market, which had trebled in the past five years, have taken a breather with property prices in the metropolis stabilizing, according to Srinivas Acharya, Managing Director, Sundaram BNP Paribas Home Finance Ltd, Chennai.

He said though his company is not into reverse mortgage right now, it is open to the concept and would respond positively to any customer demand.

Speaking to us here on Monday on the sidelines of the opening of its second branch in the city, he said the company’s loan profile has witnessed robust growth. He expected to close the first half of the current fiscal with a disbursement of about Rs 1,200 crores equaling what the company had disbursed in the whole of 2010-11 FY. In 2011-12, the loan disbursement was about Rs 1,950 crores

He said while demand was ‘still there’, what was happening at Chennai and Coimbatore was that real estate ‘prices have stabilized’ and property price increases were not taking place as frequently as in the past. Describing it as a ‘good sign’, he expected this development to draw more people to investment in housing.

While this could partly be due to buyers’ resistance, a key factor was that mega projects were taking time and absence of any price escalation in them was having an impact on smaller projects.

He said the Chennai real estate market had witnessed the sharpest growth in the country during the 2007-12 period. According to the NHB Residex, the 20-city housing price index with 2007 as the base year, Chennai realty prices had more than trebled in five years. Its nearest competitors were Faridabad, Pune, Bhopal and Indore but their gains were far less — just double the base rate. He did not expect the demand for residential space in Chennai and Madurai, among others, to come down.

Confirming the slowdown in growth in commercial real estate projects, Acharya said this segment was dependent on economic growth. The slowdown in the economy was having an impact on this sector as corporates have put the breaks on branch expansion. Even in the mall space, there was oversupply, particularly in Delhi. But Chennai could see some more malls that were specific to the residential areas where they spring up.

S. Rajagopalan, VP & Head-Operations, SBNPP Home Finance, said a big mall was coming up in the OMR area in Chennai that would fill the need for such a facility in the area.

On whether home loan rates would head South, Acharya said “home loan rates have more or less stabilised” in the past few months and the rates would go down only if the interest rates fall. But he felt that the interest rates did not have a great bearing on the purchase decision of home buyers.

He said the home finance companies are also becoming alive to the changing social situation that is reflected in loan tenures. Earlier, the home loans were made co-terminus with 60 years of age of the borrower. This was extended to 65 years and today loan closure up to 70 years is possible in exceptional cases. What has facilitated tenure extension is that companies are extending the retirement age of their employees to beat back attrition.

Referring to the home loan companies re-jigging products such as waiver of last year’s installment for prompt repayment, Rajagopalan said in the experience of most home loan providers, the maximum loan tenure has been 12-13 years. This was because of the preference for pre-closure of loans. Besides, the loan’s tax efficiency tapers off as the term progresses.

On whether his company was eyeing the reverse mortgage space, Acharya said his company did not offer this product now. But as more parents were left to take care of themselves, the need for it would grow. There has been no request for it from its clients but his company was watching the trend and would ‘certainly come out with it’ once the demand arises in the coming years.

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