At this rate, realty ceases to be interesting

HYDERABAD: Mahesh Kumar, a software professional, tok a housing loan of Rs 29 lakh for 20 years from a leading bank at a floating interest of 9.25 per cent in May 2010. His EMI was Rs 29,847 be he is forking out Rs 32,057 now. “The interest rates seem to increase every month. I have to pay a car loan EMI of Rs 10,000 too. At this rate, I may have to dispose of my house,” he says.In the past 15 months, home loan rates have gone up by almost two percentage points. For instance, State Bank of India (SBI), the country’s largest banker, which offered teaser loans at 8.50 per cent last year has now revised rates it to 10.50 per cent. Similarly, HDFC, the largest private sector bank in India, offered home loans at about 9.25 per cent in May 2010 but has now hiked it to 10.50 per cent.This means that customers with loans ranging between Rs 15 lakh and Rs 35 lakh for a period of 20 years have to pay an additional Rs 1,200 to Rs 3,000 every month. Prospective buyers are thinking twice about taking housing loans now.If rising interest rates are a cause of concern, uncertainty due to the Telangana agitation continues to haunt customers and developers alike. “We purchased an open plot a couple of years ago thinking prices would appreciate. Now prices have gone down and we are not certain if our investment will fetch us a decent return even after five years,” says G Lakshmi, an employee of Karvy Consultants.Developers on the other hand are finding the going tough as customers are in a wait-and-watch mode. “They want the interest rates to stabilize. More importantly, they are awaiting clarity on the Telangana issue,” says G Yoganand, chairman of the Manjeera Group.According to developers, there are two sets of borrowers: genuine buyers purchasing out of necessity and investors buying to cash in at a later date. Investors are currently away from the scene due to the high capital costs. “Genuine buyers are going ahead with purchases despite the increase in rates. But the number of buyers in this segment is not high,” says Yoganand.Currently, a majority of the sales happen below the Rs 25 lakh mark. “The situation hasn’t changed much for two years. For high-end properties, we are unable to go beyond the enquiry stage,” says C Sudhakar, MD, Chakilam Constructions.Due to the lack of demand, Chakilam has put on hold four development projects in Jubilee Hills and Banjara Hills.