Saturday, September 1, 2007

India real estate market and U.S. Subprime crisis - 1

Indian Realty: Subprime shock proof

The US real estate market is in tizzy because of the high default rate, known as the subprime problem. There are apprehensions that it might affect the Indian real estate market.

However, a senior official of ICICI Bank said that first of all there is no sub-prime market in India

In India even if the property price falls below the mortgage value and bank cannot recover the entire amount by selling the property given on mortgage, the (bank) will create charge on the borrowers’ income to recover the rest of the amount. Therefore, the banks are not perturbed.

In the last one year as the real estate market had started slowing down, banks had already gone slow in extending loan.

Besides, the fall is less than the margin money (which is 20 to 25% of the property value), which the borrower had paid.

According to a reliable source, bad loan in the real estate sector is less than half a percentage point.

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