Jack

In a bid to stop the funds in the Real Estate Market all the major banks are limiting home loans. They stopped giving home loans on second home and are rightnow limiting there first home, home loans too. All these are counted as the after affect or consequences of rise in Interest rates.

Even as banks are "cautious" in lending for the first house, lending for a second house is almost ruled out, say bankers. The risk associated with home loans has gone up substantially in the recent past. The worry is, what if real estate prices fall by over 15 per cent - the margin banks keep on property prices while sanctioning loans.

Typically, banks lend up to 85 per cent of the price of the house/flat, leaving a 15 per cent buffer for a fall in property prices. If the price of the property falls below the 85 per cent level, the borrower might have a tendency to give up the asset against the loan as he could own a new house for less. Such a prospect increases banks' credit risk. However, Indian banks do not subscribe much to the loan-to-asset ratio.

So Wat is the future of Real Estate? Is it the starting of bubble? Many things are striking altogether.