Purchase of properties, constructing houses :
Downward interest rates encourage borrowers
The downward trend in interest rates has encouraged borrowers to
purchase properties or construct houses. This has resulted in a growth
in the real estate sector, said Chief Executive Officer Housing
Development Finance Corporation (HDFC) Suresh Amerasekera.
With the liberalization of the Northern and the Eastern provinces
over 60 bank branches and financial institutions will be set up in the
region. There was a boom in economic activities due to the active
financial market, he said.
These institutions catered to the housing needs of the people from
the North and East by providing loan facilities, advances and other
It is important to set up a specialized housing bank in this region
to meet the growing demand, he said. “We need to provide loans at
concessionary rates to attract middle and low income groups as they are
unable to pay the commercial rates.
There is an unmet demand in the housing finance sector, especially in
the North and East. We need to harness this potential and a refinancing
scheme is important to support our efforts”, he said.
The HDFC disbursed Rs. 570 million in the first half of this year as
housing advances. “We have high expectations for the second half.
It is attributed to the accelerated development in the North and
East, falling interest rates and the estimated economic growth. We
expect the demand for houses and other related activities to rise as the
land market is stagnant at present. It was also a problem to raise funds
for long term lending”, he said. The banks were reluctant to grant loans
for condominium projects earlier. This has changed today. It is
attractive to buy now. If interest rates fall to a single digit the
demand for the housing sector will increase further, he said.
Chairman, State Mortgage and Investment Bank (SMIB) Timira Rajapakse
said that the bank provided housing loans to the value of Rs.400 million
for nearly 1,200 customers. These facilities were for direct house and
property mortgages and loans against EPF, he said.
The inquiry level has increased by 12 to 15 percent and the
disbursement for the past three months had increased. The completion of
projects such as Katunayake highway, Norochcholai power plant and the
Hambantota Port will be a boost to the housing finance sector, he said.
There will be a good market for houses next month in Colombo and the
North as over 6,000 Tamils living abroad were due to attend the Nallur
There will be investments in these areas as well and an upward trend
in the housing sector, he said.
The main concern in the sector is the default in payments. Customers
generally repay the loan in the first five to six years without a break.
Thereafter they tend to default or delay payment after makings around 60
percent of the repayment, he said.
The real estate market is competitive. However, when there are higher
interest rates for deposits the lending rates too need to be high. This
is a drawback for the housing sector and the rates need to be
competitive. More lending will provide an enormous push for the real
estate sector, he said.
At a glance:
* Over 60 banks, financial institutions to be
set up in NE
* Need for specialized housing bank vital
* Good market for houses in Colombo and the