I only paritally agree with your argument about higher EMIs not being responsible for low housing sales in India. Though, I agree that high real estate cost over time has made them difficult propositions, and also that the black money and builder / politican nexus is depriving Indians of good housing options, I feel high interest rate does play a role for people who want to buy a unit with their hard earned money.
To illustrate, if I was elgibile for a loan of 50 lacks because a bank thought I could pay an EMI of up to INR 47,000, given my current financial status, now will not give me 50 lacks because I can not pay 52,000. And please don't forget that this increase should not be seen in isolation. The rates have been steadily going up from almost 7.5% to now 11% . It is one of the highest mortage rate any where in the world.
I don't blame banks but I think RBI has to think beyond interest rate to control inflation. Central bank is hitting middle class hard by using only one lever to control inflation.
Yes. You are 100% right. Imagine paying close to i Crore for a 1000 sq. feet flat in a not so posh but crowded area in Chennai. The nexus between politician and builders is absolutely true.
Re: ...
by Bharat Engineer on May 10, 2011 09:46 AM
In China, the savings bank account gives 0% interest. In India, it is 3.5%. In China, the FD returns will be about 2%. In India, it is 7-9% There is no exploitation by banks. The exploitation is being done by real estate mafia backed by politicians' black money.