Short Notes: Home prices

Home prices in India are far from being in the bubble territory. When 95% of the home buyers are buying for residential and not for investment purposes, a bubble is not even on the horizon. This fact offers plenty of comfort to the largest mortgage lending company in India - HDFC. Its peers in the US – Freddie Mac and Fannie Mae – are still struggling to recover from the subprime crisis. However, HDFC can afford to look ahead. In an interview to a business daily, Ms Renu Sud, the MD of HDFC has opined that another 10% rise in home prices is affordable. While genuine buyers formed just 30-40% of the home sales in 2008, the figure has gone up to 95% in 2009. As per Ms Sud, this has offered more resilience to Indian real estate market. However, price rise to the extent of 25-30% will crowd out the genuine middle class buyers. It will only invite the speculative class of investors to the market. Also, certain pockets in Delhi and Mumbai that are already seeing lofty prices may see an imminent correction. Having said that HDFC expects mortgage loans to grow by 20-25% in the next fiscal. Its only caveat to developers and buyers is – "Don't let greed come in".