Home loan rates are expected to decline from early 2009, predicts the housing finance regulator, National Housing Banking (NHB). The Indian economy is likely to see a fall in the interest rates from January and therefore the housing interest rates are expected to follow the trend.

S. Sridhar, Chairman and Managing Director of the NHB, said, "Interest rates are likely to come down from January and we expect the home loan rates to fall after that."

"We expect home loans to stabilize to around 10 percent in the near term," added Mr. Sridhar.

The Central Bank's moves to raise interest rates have pushed the home loan rates upwards but still people are not stepping back from buying their dream house. The climbing interest rates have left the home loan segment unaffected.

Home loan grew by 20% last fiscal year. The loans from banks and financial companies grew at a rate of 14 to 15 percent and 24 percent respectively.

This year also the housing loan segment is expected to keep pace with the trend. Sridhar said, "This year, too, the trend appears to be similar, but it is too early to form a definitive view."

NHB has also introduced its residence index in Delhi, Calcutta, Mumbai, Bangalore and Bhopal in order to keep a track of the residential property prices. The Chairman mentioned that in the coming two months the Residex would cover 10 more cities and over the next two years more than 60 cities would be added.

NHB plans to revise the index every six months so that a clear picture of the property prices comes forward. This would tell the city-specific real estate price changes.

Recently, NHB acquired a 12.5 percent stake in Mahindra Rural Housing Finance (MRHP), a wholly-owned subsidiary of Mahindra & Mahindra Financial Services (MMFSL). MRHF provides loans in rural and semi-urban areas for buying, repair, and construction of new homes.

"NHB plans to strengthen the credit for housing finance in rural areas. Supporting a company that will focus on extending home loans in rural and semi-urban areas is in step with this objective," said S Sridhar.

Sridhar also said the bank is soon going to start mobilizing funds from fixed deposits and use the capital to fund rural homes.

"We are studying the market condition. We will launch fixed deposit products soon. Given our changed focus to facilitate rural housing and growing business in terms of loan refinancing and direct project financing, we have decided to mobilize public money through fixed deposits," he said.

However, the institution is looking at interest rate scenario before hitting in the market with its deposit mobilization products.

Earlier NHB had also developed reverse mortgage scheme, the product that promises financial security for the elderly. Reverse Mortgage is a loan that can be availed by senior citizens by mortgaging their property while continuing to occupy it, allowing them to unlock the value of their home equity. After a year of the launch, this scheme has few takers.