While ProperTT took a sabbatical during the cricket World Cup, much has changed in real estate. Here’s a re-cap of all the events that affect you.

Interest rates

The equated monthly instalment (EMI) cheques are getting fatter, and it’s beginning to tell on the common man. So much so that rising rates have become the subject of spoof on prime-time television.

In March-April, interest rates were upped twice by banks and housing finance companies (HFCs). The floating interest rate is now hovering at 11.25-12 per cent while the fixed rate has zoomed to 13.25-14 per cent. At the beginning of the year, floating and fixed rates were at 9.75 per cent and 11 per cent, respectively.

If the tenure of the loan is not stretched, the uptick in rates — by 150 basis points — translates to a 9 per cent increase in the EMI bill in the last three months.

If this does not shake you up, take this: In January 2006, floating and fixed rates were only 7.75 per cent and 8.25 per cent. This translates to more than one-fifth increase in EMI for those opting for floating rates. In case of fixed, it could be one-fourth.

The pinch the common man is feeling was recently depicted in a TV skit that showed a middle-class man, burdened under rising EMI, robbing his neighbours.

The big question now is if the trend will continue. No one’s willing to hazard a guess. The banks and HFCs are merely following directives from the Reserve Bank of India (RBI).

India’s central bank — like its counterparts in the US, the UK and Japan — has over the years tried to fight inflation by sucking money out of the financial system. This has squeezed the money supply for lending, tilting the equilibrium towards demand. As a consequence, rates have gone up.

The good news is that the RBI did not hint at applying this measure at its annual policy review meeting last month.

The central government, too, realised the plight of the middle class and reduced risk weightage for home loans of up to Rs 20 lakh — the Union Bank of India slashed interest rates by 50 basis points. But in banking circles, the buzz is that not everyone is likely to follow suit.

However, the recent developments indicate that interest rates may not rise as steadily as they did in the last 18 months. What then should new home loan seekers do? Experts believe that opting for the floating plan always helps and should work now, too. If rates begin to soften, a gain is in the offing.

The high interest rates and the RBI’s diktat to banks to reduce their exposure to the real estate sector are having a positive impact, too. Investors are deferring decisions to buy, which is leading to an increase in availability of floor space. The net result is that real estate prices are easing.

New rule to curb prices

Foreign companies have been bullish on the Indian real estate sector for a while. Many local realty companies had been using this opportunity to raise money from abroad to pump it in here. Easy money was driving the prices up and leaving home-buyers at the receiving end.

The finance ministry cracked the whip on raising foreign funds from May 1. Coupled with the RBI diktat to banks, the foreign fund leash is likely to stem the shooting property prices.

Investment guidelines

While the government’s intention is to check speculation in real estate and arrest volatility, no one is questioning the long-term growth potential of the sector. And if all goes well, small-time investors can claim a share of the pie as well.

The Securities and Exchange Board of India is learnt to be giving final touches to guidelines for real estate mutual funds. Real Estate Investment Trusts (Reit), as they are internationally known, buy, sell, manage and develop real estate assets.

Much like other mutual funds that take investors’ money (as little as Rs 5,000) and deploy them in stocks or the debt market, real estate funds put unit-holders’ money in real estate. The income generated from the business is distributed among unit-holders.