Home loan blunder!

The policy of liberal home loan disbursal based on the purchase value of the apartments, has been the fundamental cause of unprecedented rise in prices of land and in turn the homes.

Broadly the cost of a house or apartment consists of the price of land or real estate which is speculative; and the cost of construction, development charges, statutory deposits, project management fee etc. 

The primary emphasis of providing home loans at low rate of interest is to support the buying of homes by all. Instead the home loan policy now tends to support the whole price of the house; resulting in the financing of the speculative real estate at low rates of interest. This has resulted in easy availability of funding for speculation in real estate, over the years resulting in high land prices which is most unproductive and against the interest of the nation. It does not in any way, benefit the citizens nor it works towards the intended objective of providing housing for large population. It has given results, against the very objective of easy purchase of homes for all, to only the wealthy.

Can it be corrected? 

YES! By differential financing of home loans; financing the construction component at low rates of interest as it is practised now, limiting it to something like Rs 2000 per square foot; and financing the land component at the commercial lending rates of interest. 

This will ensure higher cost of finance for speculation and lower rates for the priority housing part. This would drive down the prices discounting the added cost of interest. In the long run, bring about availability of more houses at reasonable price levels.

Dhakshina Moorthy, K M

Gold and Forex.

Gold has a very significant influence in the forex reserves and the value of the Indian Rupee in forex markets. Most of the gold that are sold in the market is imported from global sources., and forms a major component of our import basket. Only a small quantity is recycled gold from old jewellery and other sources. So the enormous appetite for gold has to be satisfied with imported gold draining our forex reserves. This puts a strain on the Rupee value as the money needed for critical imports are diverted to less productive imports of gold. When the demand for forex exceeds supply , naturally the Rupee value depreciates.

The major demand for gold is more as an investment, means of hoarding wealth, etc ., which has given rise to such enormous appetite for gold vis-a-vis other investment options.

How to solve this : 

Govt of India can come up with a GOLD BOND Scheme . The Scheme to be managed by RBI and issued by various nationalised banks. Bonds at unit value of the gold on the date of purchase. Redemption at the unit value of gold on the date of redemption with a small rate of return. The returns being tax free. Intent is to divert the purchase of physical gold and move towards these bonds. 

Effect : 
1. Money stays within the country. 
2. The demand for forex drops to the extent of total value of bonds issued.
3. The Indian Rupee value appreciates.

Cascading Effect:
1. Lower cost of oil imports.
2. Drop in petrol, diesel prices.
3. Lower inflation.
4. Stability of our economy and more..

Dhakshina Moorthy, K M 

Forex Dilemma 14

At 54.86 Rupees for a US Dollar on 18^th May 2012.

At 54.91 Rupees for a US Dollar on 21^st May 2012.

At 55.01 Rupees for a US Dollar on 22^nd May 2012.

At 56.01 Rupees for a US Dollar on 23^rd May 2012.

And a Rs 7.50/- per litre increase in price of petrol from midnight of 23^rd May 2012.

HELP the nation.

It is an opportunity for remitting funds to India. Get more Rupee for less dollar.

Secondly make it your way of showing your patriotism by remitting now.

Dhakshina Moorthy, K.M.

Forex Dilemma 13

1 USD = INR 53.92

Shame!

RBI is supposed to be intervening in the forex market.

Too little too late.

India is highly dependent on oil imports. It will have cascading effect on the already high inflation even according to the skewed govt figures.

Strengthening of the rupee to INR 35 to a dollar levels will ensure sustained growth for the nation.

Dhakshina Moorthy, K.M.