Lower Property Prices Of Unsold Units: Finance Minister

Bangalore: The recently-appointed finance minister, P. Chidambaram wants developers to reduce property prices. Chidambaram has asked government-owned banks to create pressure on real estate developers to reduce property prices, which in-turn will beat economic slowdown, reports Sangita Mehta & Kailash Babar of ET Bureau.

The finance minister in a meeting had asked bank chiefs to inculcate in the developers the need for project completion on time and lower property prices of unsold inventories that are ready for possession.

A banker quoted Chidambaram "Builders are sitting on huge inventories (unsold apartments) which they are neither able to sell at the prevailing prices nor are they allowing others to buy by lowering the prices," reports Economic Times.

"A huge quantum of capital is locked. Why are banks not putting pressure on them (builders) to lower prices since you have funded both the builder and the retail home loan borrower," said the finance minister to bankers, reports Economic Times.

Banks have funded around 1.2 lakh crore to developers while, according to Reserve Bank of India (RBI) data, the home loan portfolio of developers was 2.5 lakh crore in March 2012.

S Raman, CMD of Canara Bank, cited "Given the slowdown in the economy, builders should take a relook at the market condition and should effect some reduction in prices across the board — from premium to affordable. Builders should not expect only banks to lower interest rates on home loans to revive the economy, they too should contribute by lowering home prices which by itself would act as an additional stimulus to the economy," reports Economic Times.