By Dr. Sanjay Chaturvedi, LLB, PhD
“The impetus is to aid the housing market. That’s an area that’s fallen short in this recovery. In most other U.S. postwar recoveries, we’ve seen a pretty sharp snap back in housing. Of course, the reason it hasn’t come back in this recovery is that this recession was essentially caused by us building too many houses prior to the recession. We still have a huge overhang of houses that haven’t been sold that are vacant. And it’s going to take us a while before we want the houses we have, much less need to build more.”[ The only member of the Federal Open Market Committee to vote against QE3, Richmond Federal Reserve Bank President Jeffrey M. Lacker, said this.
The Interest rates in Developed nations has almost gone and in Japan, Home Loans are available for almost nothing. The two type of interest rates effect the financial markets. One the Banks offer for FDs and deposits. The other is the lending rates or PLR (Prime Lending Rates) which is deregulated by Reserve Bank of India. Indian companies brought funds through External Commercial Borrowings route for 3 to 4% and have deployed these funds for 16%. In Germany, there are no taker of loans even for 3%. Hence, the funds were directed towards Indian markets or developing nations. Central banks use these rates to lend money to commercial banks influencing mortgage rates and other types of loans. Central bank interest  rates are one of the most effective tools to promote growth and keep inflation under certain limits. For instance, the Governing Council of the European Central Bank aims at keeping annual inflation under 2% while the Board of Governors of the U.S. Federal Reserve has a dual mandate of promoting sustainable growth and maintaining price stability.
Developed nations, as indicated in the graph have seen a saturation in interest rates. In Indian perspectives, as estimated by peers that interest rates are key to mobilise Real Estate markets. Readers must be aware that even 21% interest rates was achieved by Citi Bank NA in 1995-96. Starting from Belarus till Japan, the home loan interest since 205 till today have seen a declining trend. Most unfortunate in India, even though government had allowed official ECB in last Union Budget, homes loans are still finding 10 to 12% level when it should be least dearer as compared with PLR indicated by RBI. NHB itself refinance the home loan at 12.75% much higher than market segmented for.
EMI on Home loans and interest rates are eligible for deduction subject to certain limit, is the limit justified? when property transactions have gone much above the circuit breakers.
| Country | Latest | 2011 | 2010 | 2009 | 2008 | 2007 | 2006 | 2005 |
|---|---|---|---|---|---|---|---|---|
| Belarus | 30.00 | 45.00 | 10.50 | 13.50 | 12.00 | 10.00 | 10.00 | 11.00 |
| Guinea | 22.00 | 22.00 | 16.75 | 9.00 | 22.25 | 22.25 | 22.25 | |
| Malawi | 21.00 | 16.00 | 13.00 | 15.00 | 15.00 | 15.00 | 20.00 | 25.00 |
| Sierra Leone | 20.00 | 21.00 | 21.00 | 22.00 | 24.00 | 25.00 | 25.00 | 25.00 |
| Venezuela | 17.57 | 15.55 | 17.89 | 17.74 | 17.73 | 20.21 | 14.63 | 14.09 |
| Argentina | 15.06 | 18.75 | 11.08 | 8.95 | 7.62 | 4.12 | ||
| Ghana | 15.00 | 12.50 | 13.50 | 18.00 | 17.00 | 13.50 | 12.50 | 15.50 |
| Yemen | 15.00 | 15.00 | 15.00 | 10.00 | 13.00 | 13.00 | 13.00 | 13.00 |
| Liberia | 13.42 | 13.85 | 14.17 | 14.10 | 14.30 | 14.30 | 15.20 | 14.00 |
| Mongolia | 13.25 | 12.25 | 11.00 | 10.00 | 14.00 | 8.40 | ||
| Uganda | 12.50 | 23.00 | ||||||
| Gambia | 12.00 | 14.00 | 15.00 | 16.00 | 16.00 | 15.00 | 14.00 | 19.00 |
| Iran | 12.00 | 12.00 | 12.00 | 14.00 | 16.00 | |||
| Nigeria | 12.00 | 12.00 | 6.25 | 6.00 | 9.75 | 9.50 | ||
| Tanzania | 12.00 | 12.00 | 7.58 | 3.70 | 15.99 | 16.89 | 20.07 | 19.33 |
| Uzbekistan | 12.00 | 12.00 | 14.00 | 14.00 | 14.00 | 14.00 | 14.00 | 16.00 |
| Sudan | 11.50 | 10.70 | 9.70 | 11.40 | 11.20 | |||
| Kenya | 11.00 | 18.00 | 6.00 | 7.00 | 8.50 | 8.75 | 10.00 | 8.07 |
| Serbia | 10.95 | 9.75 | 11.50 | 9.50 | 17.75 | 10.00 | 14.00 | |
| Angola | 10.25 | 10.50 | 25.00 | 30.00 | 19.60 | 19.60 | 14.00 | 95.00 |
| Lebanon | 10.00 | 10.00 | 10.00 | 10.00 | 12.00 | 12.00 | 12.00 | 12.00 |
| Myanmar | 10.00 | |||||||
| Pakistan | 10.00 | 12.00 | 14.00 | 12.50 | 15.00 | 10.00 | 9.50 | 9.00 |
| Armenia | 9.50 | 11.00 | 10.25 | |||||
| Botswana | 9.50 | 9.50 | 9.50 | 10.00 | 15.00 | 14.50 | 15.00 | |
| Madagascar | 9.50 | 9.50 | 9.50 | 9.50 | 12.00 | 12.00 | 12.00 | 16.00 |
| Mozambique | 9.50 | 15.00 | 15.50 | 11.50 | ||||
| Egypt | 9.25 | 9.25 | 8.25 | 8.25 | 11.50 | 9.00 | 9.00 | 10.00 |
| Mauritania | 9.00 | 9.00 | 9.00 | 9.00 | 12.00 | 12.00 | 14.00 | 14.00 |
| Uruguay | 9.00 | 8.00 | 6.50 | 6.25 | 7.75 | 7.25 | ||
| Vietnam | 9.00 | 9.00 | 8.00 | 8.00 | 8.50 | 8.25 | 8.25 | 8.25 |
| Russia | 8.25 | 8.00 | 7.75 | 8.75 | 13.00 | 10.00 | 11.00 | 12.00 |
| India | 8.00 | 8.50 | 6.25 | 4.25 | 6.00 | 7.00 | 7.00 | 6.25 |
| Nepal | 8.00 | 7.00 | 7.00 | 6.50 | 6.50 | 6.25 | 6.25 | 6.00 |
| Seychelles | 7.88 | 3.94 | ||||||
| Bangladesh | 7.75 | 7.25 | 5.50 | 4.50 | 8.75 | |||
| Sri Lanka | 7.75 | 7.00 | 7.25 | 7.50 | 10.50 | 10.50 | 10.00 | 8.75 |
| Rwanda | 7.50 | 7.00 | 6.00 | 7.50 | 8.00 | 9.00 | 9.00 | 9.00 |
| Ukraine | 7.50 | 7.75 | 7.75 | 10.25 | 12.00 | 8.00 | 8.50 | 9.50 |
| Brazil | 7.25 | 11.00 | 10.75 | 8.75 | 13.75 | 11.25 | 13.25 | 18.00 |
| Bosnia And Herzegovina | 7.00 | 7.00 | 7.00 | 7.00 | ||||
| Honduras | 7.00 | 5.50 | 4.50 | 4.50 | 7.75 | 7.50 | 6.00 | 7.00 |
| Papua New Guinea | 6.75 | 7.75 | 7.00 | 7.00 | 8.00 | 6.00 | 6.00 | 6.00 |
| Tajikistan | 6.50 | 9.80 | 8.25 | 8.00 | 13.50 | 15.00 | 12.00 | 9.00 |
| Croatia | 6.25 | 6.25 | 9.00 | 9.00 | 9.00 | 7.50 | 7.50 | 7.50 |
| Hungary | 6.25 | 7.00 | 5.75 | 6.25 | 10.00 | 7.50 | 8.00 | 6.00 |
| Jamaica | 6.25 | 6.25 | 7.50 | 10.50 | 17.00 | 11.65 | 11.65 | 12.60 |
| Bhutan | 6.00 | |||||||
| China | 6.00 | 6.56 | 5.56 | 5.31 | 5.31 | 7.29 | 6.12 | 5.58 |
| Congo | 6.00 | 24.50 | 22.00 | 65.00 | 40.00 | |||
| Iceland | 6.00 | 4.75 | 4.50 | 10.00 | 18.00 | 13.75 | 13.30 | 9.97 |
| Iraq | 6.00 | 6.00 | 6.00 | 7.00 | 15.00 | 20.00 | 16.00 | 7.00 |
| Cameroon | 5.75 | 5.75 | 5.75 | |||||
| Equatorial Guinea | 5.75 | 5.75 | 5.75 | |||||
| Gabon | 5.75 | 5.75 | 5.75 | |||||
| Georgia | 5.75 | 6.75 | 7.50 | 5.00 | 8.00 | |||
| Indonesia | 5.75 | 6.00 | 6.50 | 6.50 | 9.25 | 8.00 | 9.75 | 12.75 |
| Turkey | 5.75 | 5.75 | 6.50 | 6.50 | 15.00 | 15.75 | 17.50 | 13.50 |
| Brunei | 5.50 | 5.50 | 5.50 | 5.50 | 5.50 | 5.50 | 5.50 | 5.50 |
| Kazakhstan | 5.50 | 7.50 | 7.00 | 7.00 | 10.50 | 11.00 | ||
| Namibia | 5.50 | 6.00 | 6.00 | 7.00 | 10.50 | 10.50 | ||
| Paraguay | 5.50 | 7.25 | 4.50 | |||||
| Azerbaijan | 5.25 | 5.25 | 3.00 | 2.00 | 8.00 | 13.00 | 9.50 | 9.00 |
| Romania | 5.25 | 6.00 | 6.25 | 8.00 | 10.25 | 7.50 | 8.75 | 7.50 |
| Chile | 5.00 | 5.25 | 3.25 | 0.50 | 8.25 | 5.75 | 5.25 | 4.50 |
| Costa Rica | 5.00 | 5.00 | 6.50 | 9.00 | 10.00 | 5.52 | 8.97 | |
| Guatemala | 5.00 | 5.50 | 4.50 | 4.50 | 7.25 | 6.50 | 5.00 | 4.25 |
| Jordan | 5.00 | 4.50 | 4.25 | 4.75 | 6.25 | 7.00 | 7.50 | 6.50 |
| Laos | 5.00 | 5.00 | 5.00 | 4.00 | 7.00 | 12.00 | 20.00 | 20.00 |
| South Africa | 5.00 | 5.50 | 5.50 | 7.00 | 11.50 | 10.50 | 8.50 | 7.00 |
| Mauritius | 4.90 | 5.40 | 4.75 | 5.75 | 7.75 | 9.25 | 8.50 | |
| Colombia | 4.75 | 4.75 | 3.00 | 3.50 | 9.50 | 9.50 | 7.25 | 6.00 |
| Mexico | 4.50 | 4.50 | 4.50 | 4.50 | 8.25 | 7.50 | 7.00 | 8.25 |
| Moldova | 4.50 | 8.50 | 8.00 | 5.00 | 16.50 | 16.00 | 14.50 | 12.50 |
| Poland | 4.50 | 4.50 | 3.50 | 3.50 | 5.00 | 5.00 | 4.00 | 4.50 |
| Qatar | 4.50 | 4.50 | 5.55 | 5.55 | 5.55 | 5.55 | 5.55 | 5.10 |
| Peru | 4.25 | 4.25 | 3.00 | 1.25 | 6.50 | 5.00 | 4.50 | 3.25 |
| Albania | 4.00 | 4.75 | 5.00 | 5.25 | 6.25 | 6.25 | 5.50 | 5.00 |
| Algeria | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 | 4.00 |
| Benin | 4.00 | 4.25 | 4.25 | |||||
| Burkina Faso | 4.00 | 4.25 | 4.25 | |||||
| Ivory Coast | 4.00 | 4.25 | 4.25 | |||||
| Mali | 4.00 | 4.25 | 4.25 | |||||
| Niger | 4.00 | 4.25 | 4.25 | |||||
| Senegal | 4.00 | 4.25 | 4.25 | |||||
| Togo | 4.00 | 4.25 | 4.25 | |||||
| Tunisia | 3.75 | 3.50 | 4.50 | 4.50 | 5.25 | 5.25 | 5.25 | |
| Macedonia | 3.73 | 4.00 | 4.11 | 8.50 | 7.00 | 4.77 | 5.74 | 8.52 |
| Philippines | 3.50 | 4.50 | 4.00 | 4.00 | 5.90 | 5.40 | 7.50 | 7.50 |
| Kyrgyzstan | 3.35 | 13.61 | ||||||
| Australia | 3.25 | 4.25 | 4.75 | 3.75 | 4.25 | 6.75 | 6.25 | 5.50 |
| Panama | 3.21 | 3.21 | 4.92 | 6.70 | 2.50 | 5.07 | 6.15 | 6.80 |
| Malaysia | 3.00 | 3.00 | 2.75 | 2.00 | 3.25 | 3.50 | 3.50 | 3.00 |
| Morocco | 3.00 | 3.25 | 3.25 | 3.25 | 3.50 | 3.25 | 3.25 | 3.25 |
| South Korea | 2.75 | 3.25 | 2.50 | 2.00 | 3.00 | 5.00 | 4.50 | 3.75 |
| Thailand | 2.75 | 3.25 | 2.00 | 1.25 | 2.75 | 3.25 | 5.00 | 4.00 |
| Latvia | 2.50 | 3.50 | 3.50 | 4.00 | ||||
| New Zealand | 2.50 | 2.50 | 3.00 | 2.50 | 5.00 | 8.25 | 7.25 | 7.00 |
| Afghanistan | 2.43 | 2.36 | 13.13 | 6.95 | 2.50 | 2.50 | ||
| Bahrain | 2.25 | 2.25 | 2.25 | 2.25 | 2.75 | 5.30 | 5.50 | 4.50 |
| Cuba | 2.25 | 2.25 | 2.25 | 2.25 | 2.25 | 2.25 | 2.25 | 2.25 |
| Israel | 2.00 | 2.75 | 2.00 | 1.00 | 2.50 | 4.00 | 4.50 | 4.50 |
| Kuwait | 2.00 | 2.50 | 2.50 | 3.00 | 3.75 | 6.25 | 6.25 | 6.00 |
| Saudi Arabia | 2.00 | 2.00 | 2.00 | 2.00 | 2.50 | 5.50 | 5.20 | 4.50 |
| Bolivia | 1.91 | 1.86 | 0.86 | 1.94 | 5.82 | 4.70 | 3.57 | 4.46 |
| Taiwan | 1.88 | 1.88 | 1.63 | 1.25 | 2.00 | 3.38 | 2.75 | 2.25 |
| Lithuania | 1.50 | 1.75 | 1.75 | 1.75 | 3.00 | 5.00 | 4.25 | 3.00 |
| Norway | 1.50 | 1.75 | 2.00 | 1.50 | 3.00 | 5.00 | 3.25 | 2.25 |
| Sweden | 1.25 | 1.75 | 1.25 | 0.25 | 2.00 | 4.00 | 2.75 | 1.50 |
| Cambodia | 1.19 | 1.19 | 1.15 | 1.21 | 2.05 | 1.90 | 1.83 | 2.08 |
| Canada | 1.00 | 1.00 | 1.00 | 0.25 | 1.50 | 4.25 | 4.25 | 3.00 |
| Oman | 1.00 | 2.00 | 2.00 | 2.00 | 2.00 | |||
| United Arab Emirates | 1.00 | 1.00 | 1.00 | 1.00 | 1.50 | 4.25 | ||
| Euro Area | 0.75 | 1.00 | 1.00 | 1.00 | 2.50 | 4.00 | 3.25 | 2.25 |
| Hong Kong | 0.50 | 0.50 | 0.50 | 0.50 | 0.50 | 5.75 | 6.75 | 5.50 |
| Macao | 0.50 | 0.50 | 0.50 | 0.50 | 0.50 | 5.75 | 6.75 | 5.75 |
| United Kingdom | 0.50 | 0.50 | 0.50 | 0.50 | 2.00 | 5.50 | 5.00 | 4.50 |
| United States | 0.25 | 0.25 | 0.25 | 0.25 | 0.25 | 4.25 | 5.25 | 4.00 |
| Denmark | 0.20 | 0.70 | 1.05 | 1.20 | 3.75 | 4.25 | 3.75 | 2.40 |
| Czech Republic | 0.05 | 0.75 | 0.75 | 1.00 | 2.25 | 3.50 | 2.50 | 2.00 |
| Bulgaria | 0.03 | 0.22 | 0.18 | 0.55 | 5.77 | 4.58 | 3.26 | 2.05 |
| Singapore | 0.01 | 0.02 | 0.13 | 0.01 | 0.06 | 0.13 | 2.75 | 1.56 |
| Japan | 0.00 | 0.00 | 0.00 | 0.10 | 0.10 | 0.50 | 0.25 | |
| Switzerland | 0.00 | 0.00 | 0.25 | 0.25 | 0.50 | 2.75 | 1.75 | 0.75 |
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