The Indian Housing Finance Industry At Crossroads

The entry of commercial banks and other private sector companies, however, changed the dynamics of the industry, and for the first time, all the players emphasized on marketing. Many of the HFCs targeted the middle class, which had begun availing of housing loans largely due to the declining interest rates.

Analysts pointed out that housing loan companies needed a strong brand image to build a strong relationship with these customers. It was felt that if interest rates increased in the future, this brand image would help companies gain/retain their marketshares. Direct marketing emerged as a very effective tool for attracting customers in this industry...

Removing these exemptions would, according to analysts, lead to a decline in demand, especially in the Rs 1-2 million loans segment (reportedly, this segment contributed around 80% of the market). Some industry observers were of the opinion that the removal of exemptions could result in the lowering of real estate prices by companies to attract new customers. However, others felt that the acceptance of the Kelkar Committee's recommendations would not result in a drop in the cost of real estate because prices had reportedly touched all-time low. Ashok Narang, Proprietor, L. Lachmandas and Company remarked, "There is already an oversupply situation in most of the big cities in India. So, the prices are more or less close to the bottom"...