| Chidambaram: Generous helping
New Delhi, Aug. 6: The government today said it would not impose ceilings on housing loans and expected them to get cheaper with a moderation of inflation.
Finance minister P. Chidambaram said, “There is a demand for housing loans. We cannot have quantitative ceilings on housing loans, because there is an aspiration (for homes).”
After a 52 per cent increase in home loans, the Reserve Bank of India sought to cool down the market by assigning higher risk weights on loans, leading to costlier mortgages.
To mitigate the interest impact of higher weights, the government introduced differential rates for loans below Rs 20 lakh.
Chidambaram said: “I do not think that it is right to put restrictions on housing loans. Since there is a high growth, it can lead to a bubble. The RBI is right in increasing risk weight and making some regulatory prudential requirements to cool down the sector.”
The interest rate on home loans has moved to over 11 per cent from around 8 per cent in over two years.
Chidambaram said it was not for the first time that interest rates were high. In 1999-00 and 2000-01, loans were quite expensive.
The minister said the RBI had informed him of its desire to follow a tight monetary policy, but often high fuel and food prices limit the impact of measures.
“The RBI monetary policy works on core inflation... That is, minus fuel and minus food items.
“This is the case all over the world. So when fuel and food drive inflation, of course, you have to tighten monetary aggregates. That is what the RBI is doing,” he said.
According to the RBI’s quarterly review of the monetary policy, growth in housing loans has decelerated to 24.6 per cent and real estate loans to 69.8 per cent between January and March.
Oil price move
Chidambaram said he had discussed the possibility of a hike in petrol and diesel prices with oil minister Murli Deora.
He said Deora should take a call on the issue. “Rising crude prices is a matter of grave concern... it is entirely for the ministry of petroleum to propose that (an increase in domestic fuel prices) and seek a view on this.”
The minister was responding to a question on the crude price spike necessitating an increase in retail prices.
Crude prices have touched an all-time high of $78 a barrel. India imports more than 70 per cent of its crude requirement.
In cabinet meetings, Deora has highlighted the plight of the oil PSUs — Indian Oil, Bharat Petroleum and Hindustan Petroleum — which were losing Rs 195 crore daily because of selling petrol, diesel, LPG and kerosene below the cost price.