Realty index outperforms Sensex on cheaper home loan rates

Seven realty shares rose by 2.71% to 14.19%, on hopes a decision to offer lower interest rate on some home loans will revive housing demand

At 13:18 IST, the BSE Realty index was up 5.82% at 5,571.72, outperforming the Sensex, which was up 1.55% at 9,840.10.

DLF, Unitech, Indiabulls Real Estate, Omaxe, Sobha Developers, Ansal Properties & Infrastructure, Puravankara Projects were up by 2.71% to 14.19%.

Indian state-run banks will offer special rates on some loans to home buyers and small businesses, as part of a government-led initiative to boost economic growth and shore up confidence amid a global liquidity crisis.

Public sector banks will offer home loans up to Rs 5 lakh at 8.5% and between Rs 5 lakh to Rs 20 lakh at 9.25%. The new home loan rates, part of a move to stimulate demand in the affordable housing segment, will be effective until 30 June 2009. Currently, loans in that category cost borrowers more than 10%.

The banks will take a 10% margin on home loans up to Rs 5 lakh and 15% margin on home loans up to Rs 20 lakh.

Real estate developers are facing tough time as high lending rates and a surge in realty prices last year sapped demand for homes and apartments. As per recent reports, recovery in India's property market in the near term depends on lower home loan rates to lure first-time buyers.