Home loan borrowers may have to wait awhile before they see interest rates soften unless the Reserve Bank of India relaxes some of the fiscal curbs it has imposed on banks, Rajiv Sabharwal, Senior General Manager at ICICI Bank, and in-charge of its home loan division said.

With loans no longer cheap, and the ongoing correction in real estate prices, the demand for home loans is also expected to slow down marginally, Sabhrawal said. The home loan industry grew by 25 percent in 2006-07 compared to the previous year, but the growth is expected to come down to around 18 percent in the current financial year, he added.

Sabharwal said the correction phase in the real estate industry was expected to continue till September. "During the festival season the market should see the reversal of the current trend," he added. Real estate price are expected to correct between 15 to 20 percent in certain pocket from its peak level.

According to Sabharwal, the real estate sector will again witness the same kind of buoyancy it showed last year in 2008. Demand is a function of cost of funds - the interest rate- and the price of the product, he noted. In the next eight to 10 months, he maintained, both these would undergo changes.
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