BUY sell RENT Patna

residential/commercial

Patna Real estate Properties and Home Loan Connection. ( 07/09/2013)



Role of home loan and other financial facilities in the growth of Patna Real Estate sector



Real estate sector in Patna is the dark horse of the booming Bihar economy. Transactions related to buying and selling of residential properties in Patna increased considerably in the last five years. However, commercial property investments in Patna remained passive due to agriculture based Bihar’s economy, lack of electricity and industrialization in Bihar, less penetration of IT sector in Patna, unrealistic property taxes resulting in high vacancy and falling prices. It is time when Patna properties need to climb new heights and become a vital sector to kick-start economy of Bihar to further growth. At such a point buyers require loans to buy the property of their choice in Patna, Bihar.

The buyer of a real estate property in Patna could be of different types - corporate, individual, trust or a group of individuals. But the common requirements of all these buyers are funds. The need for loans is taken care of by specialized housing finance companies, foreign banks and nationalized banks spread across the state that are set to play the most important role in the development of the real estate industry in Patna and are the end users. The government is required to address the needs and expectation of these players whose mortgage-backed securities would enable housing finance companies in Patna to raise funds at cheaper costs from capital markets and provide another investment tool for investors in Patna. Housing finance companies are allowed to raise funds from the market in the form of fixed deposits and bonds with tenure of not more than 7 years


 


Housing loans available with ease



In the current economy of Bihar, the real estate sector has the maximum propensity to generate income and demand for materials, equipment and services. There is a need for creating conducive environment for property transactions in Patna. The current crisis faced by the people involved with the real estate sector in Patna, be it the realtors, investors or the housing finance companies is the shortage of funds and non-existence of efficient legal frame work. It can be said that housing finance companies were formed to cater to the co-existing buyer’s requirements of home loans for investing in properties in Patna. Home loans in Bihar are made available by financial institutions to both Indian and NRI customers at floating and fixed rate of interest and also at attractive EMI options.

 for construction or buying a new home
 for home repairs and renovations
 for purchase of plots
 against mortgage of property

These customized facilities of availing home loans for properties in Patna has lead to the growth of the Patna realty sector and with support from the government in terms of sector friendly laws, this sector certainly has the ability to contribute to SGDP growth substantially contributing to boom in Bihar’s economy.


 


 


Real estate and rising interest rates



Academically rise in interest rates affect the price of real estate in two ways. One, the higher interest rate on home loans would increase the monthly installment. The effect of 0.5 percent change in rate of interest get multiplied manifolds when its compounded effect is calculated for a loan of 20 years. Second, because of higher bank rate, liquidity in the market goes down and which in turn reduce the investment in real estate.

In last three to four years, real estate prices in Patna skyrocketed 80 to 400 percent. A flat costing Rs 18 lakh in Boring Road in Patna five years earlier now costs around Rs 55 lakh. Because of hardening interest rates on home loans ( rose from 8 to 10.5 percent in last few years), the middle class is finding it difficult to afford a house and in past six months of 2013 demand of real estate properties in Patna has substantially stagnated.

Rise in petrol prices and other commodities have further put the pressure on monthly budget of middle class, forcing them to postpone the purchase of house in Patna. The interest rates are further expected to rise in future and also most of the banks have already met its 25% of total lending to the housing sector and would be unable to increase the loan in housing sector. In order to discourage speculative investors in real estate, RBI has directed the banks not to lend without verifying government clearances and also increased the risk weight of real estate. The tightening of funds will bring in a lull for few years in Patna real estate market.


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