Banks are increasingly seeing defaults on housing loans, especially those taken to finance second houses bought for investment purposes. This is primarily because high interest rates on home loans, high food and medical inflation and the grim job environment have led to repayment hurdles.“Customers borrowing money to buy houses for investment purpose tend to be more vulnerable during an economic slowdown than those buying properties for end-use. There have been instances in which some customers who borrowed money for buying a second home defaulted. When property prices are stagnant, risks on these portfolios deteriorate much faster,” said the head of retail lending at a private sector bank. “People who have bought a house for investment purposes tend to have lower emotional attachments; they tend to walk out and cut losses. Recent data show property prices in India have fallen in 22 of the 26 prime markets. Therefore, there are instances of such defaults,” he added.
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