>HOUSE PRICING WAR - VYING FOR A SHARE IN THE PIE (INDIA INFOLINE)

■ Mortgage: GDP ratio at 7% provides room for further growth
The ratio of mortgage to GDP in India has remained low at 7%, as against 12% for China, 41% for Hong-Kong and more than 80% for developed countries, thus providing potential for further growth in the housing sector during the coming years.

■ Revival in real estate volumes supported by low interest rate
The correction in the real estate prices in the initial period of the year and low interest rate schemes announced by the banks/HFCs have resulted in significant surge in real estate volumes over the past few months.

Home loan rates - a number play game

■ Sluggish credit demand; banks increase their exposure to housing sector
Due to sluggish credit demand (up 10.1% yoy for the fortnight ended November 20th, 2009), banks have been diverting their funds towards housing loans.

■ HFCs continue to do business as usual
HFCs foresee the increasing share of banks exposure towards home loan segment as a temporary phenomenon. In our view, banks are likely to face asset-liability mismatch as these loans have a long hestation period.

■ Differential interest rate may not remain for long
While the discounted/special scheme rates are offered to new home loans, existing customers continue to pay higher rate of interest. The Indian Banks Association has planned to introduce a uniform rate for all borrowers.

See also major events/Rate cuts announced by banks/HFCs in report

To read the full report: HOUSING PRICES