Responding to the sky rocketing housing prices in India, including those in the smaller cities, HDFC chairman Deepak Parekh asked builders to focus more on affordable housing, rather than luxury houses. Lending aggressively to the developers is dangerous in the current scenario, he added.
Home buyers – Be cautious: The eminent banker warned home buyers to be cautious about the ‘too-good-to-be-true’ schemes offered by the property developers where builders claim of paying interest on the borrowers’ loans, etc.
Banks – Avoid aggressive lending: Deepak Parekh has asked financing companies to stop providing innovative and aggressive loans – including teaser rates in which the interest rates increase gradually, lending money to the developers at the same rate of interest as that of individual home loans and complete up-fronting of construction finance to developers even before the ground is broken. As the construction finance includes higher risk, he mentioned in his annual letter to shareholders of HDFC, to include such risks into the pricing.
Need for affordable housing: He also mentioned that the inflated housing prices in the country are due to the acute housing shortage. And like what he was saying from the past few years he once again emphasized saying that increased supply is the only way to bring the prices down. Appreciating the new entrepreneurs and first-time developers for venturing into the affordable housing, he asked the more established and high-end developers to understand the need and focus on affordable housing rather that luxury homes.
Source: The Financial Express