Indian chamber demands mortgage interest rate reduction

A prominent trade body is calling on the Reserve Bank of India (RBI) to do more to help real estate sales.

The Associated Chambers of Commerce and Industry of India (Assocham) is calling on the bank to help reduce mortgage rates.

It accused the RBI of being too interested in driving down inflation and said it should instead be looking to reduce interest rates.

Assocham said the bank was “over focussed” on inflation and was “totally ignoring” the consequences of tight credit conditions on the real estate industry.

An Assocham statement read:

“The Reserve Bank of India should immediately review its monetary policy to remove its excessive focus on taming inflation only and also concentrate to reduce the mortgage rate.”

The frank words followed a report produced by the association on the real estate market and the economy.

Officials said demand for property in India remained very high but this was being stifled by high borrowing rates.

Assocham also noted the home loan to GDP ratio in India is just above five per cent, significantly lower than the markets of the US and the UK, where it is more than 50 per cent.

India’s real estate sector is still expected to grow despite slowing sales in the current climate.

Expansion in the sector is still at 30 per cent and $12 billion worth of investment is expected to be ploughed into the industry by the end of 2009.

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