Indian Realty: Subprime shock proof

In the last six months the default cases in the sub-prime borrowers’ category has gone up substantially. This has led to increase in the interest rates on sub-prime loan, making the repayment even tougher and further increasing the default rate. As the interest rate is going up, the value of sub-prime portfolio, which have bundled together in the form of security has gone down. Because of this, the buyer of sub-prime portfolio is likely to loose money. However, a senior global real estate fund manager said that the funds that have come to India are long-term resub-prime borrowers get at around 8.25%. As the interest rate is high, the chances of default by the sub-prime borrowers further increase.