One of the key anti-cyclic measures that government of India has been working on to halt the pace of slowdown is housing and civil constriction. However, despite a number of steps taken by Reserve Bank of India (RBI) to boost lending in housing sector, and lower rates of interest being offered by banks, credit off-take in this segment has not been picking up.
Finance ministry’s data shows that credit growth in the housing sector was mere 2.5% between November 7, 2008 and January 16, 2009. The figure compares very unfavorably with credit growth of about 10-15% over past many quarters to credit crunch. After the fall of Lehman Brothers in September 2008 in the US, international financial markets froze. Back home in India, lack of foreign funding coupled with RBI’s tight money policy and falling stock market dried up the cried market.
Since then the RBI has taken a number of steps to improve credit to the battered housing sector including allowing banks additional loan structuring in real estate portfolio and refinancing facilities to non banking financial institutions engaged in lending to home buyers.
However, it seems that the sentimental impact of the ongoing economic downturn and uncertain outlook is proving stronger than incentives being given the RBI and banks. Clearly, the government needs to take some more steps to ensure that credit delivery to home buyers increase if it wants to use construction sector as key driver of economy amidst recessionary atmosphere.