RBI measures do not benefit housing finance firms

Realty shares hit by slowdown in the sector
Realty shares dropped on concerns banks may not raise lending to realty firms despite the latest Reserve Bank of India measures to ease lending to the cash-stripped sector.
At 10:45 IST, the BSE Realty index was down 4.92% at 1,912.50, underperforming the barometer index the BSE Sensex, which was down 2.24% at 9,174.86.
DLF, Unitech, Indiabulls Real Estate, Housing Development & Infrastructure, Sobha Developers, Mahindra Lifespace Developers, and Omaxe were down 1.55% to 9.40%.
The Reserve Bank of India (RBI) on Saturday (15 November 2008) announced fresh steps to free up liquidity for the troubled realty sector. The RBI reduced the risk weightage on bank exposure to the real estate sector and non-deposit taking non-banking financial institutions (NBFCs) from 150% to 100% -- it means, banks will need less capital to give such loans.
Additionally, standard provisioning requirements for commercial real estate sector has been reduced to a uniform level of 0.40%.
Despite the measures, it remains to be seen whether banks will raise lending to the realty sector given the severe slowdown and increasing risk of non performing assets (NPAs).


RBI measures do not benefit housing finance firms
Shares of the housing finance firms dropped as concerns of slowdown in demand for new homes and fears of rise in delinquencies in a weakening economy offset latest measures announced by the central bank to help the firms raise funds.
Housing Development Finance Corporation (HDFC), LIC Housing Finance, Dewan Housing Finance Corporation, GIC Housing Finance, were down 1.22% to 5.53%.
The Reserve Bank of India (RBI) on Saturday (15 November 2008) allowed housing finance companies to raise short-term foreign-currency loans. This is a temporary step only available to companies registered with the National Housing Bank.
But the demand for housing loans has slowed down due to higher cost of borrowing.