The intensity of a revival in demand for home loans had softened after a

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spike witnessed during June-August 2009. The total home loans outstanding increased by Rs 4,049 crore during September-October 2009 to Rs 284,770 crore, against an increase of Rs 9,207 crore during the three months of June-August 2009.

Home loan growth had slumped for almost a year up to May 2009 with outstanding loans increasing by just around Rs 1,000 crore every month. The slump had followed a global squeeze in credit that resulted in the Indian economy sagging under the weight of the global recession.

India had seen exports dwindle and sales across various industries drop amid job losses and salary freezes, and in some instances salary cuts, causing individuals to postpone decisions for purchase of homes and cars.

There was a good revival seen during June-August 2009 as the Indian economy was seen returning to the growth track and with real estate prices corrected by varying degrees.

“The fall in demand for home loans from September 2009 was because of an increase in prices of residential properties in some cities. This made purchases of the desired homes unaffordable,” said the executive director of a public sector bank, who did not want to be quoted.

“The improvement in the sentiment notwithstanding, the comfort for borrowing a large amount for probably a once-in-a-lifetime decision to buy a house is not at the level it was before the global recession struck,” a senior official with another public sector bank said.

“That’s the reason why the largest mortgage lender had to succumb to market pressure and offer loans at a teaser dual-interest rate to compete with the SBI (State Bank of India) offer,” he added.

The head of real estate at an asset management company said the increase in property prices is hurting demand to a certain extent. “Developers expect prices to rise further with the economy starting to boom again and have raised prices to hold on to the stock for now for selling at higher rates later,” he claimed.