The Indian Housing Finance and Real Estate market has a lot to learn from the US Sub prime crisis. I happen to read a very interesting point of view put by Mr. Deepak Parekh (Chairman HDFC and one of the pioneering financial thinkers that India has ever produced). Here are some of the excerpts -
The US sub prime mortgage crisis is likened to Piggybacking on a 'Ninja' with 'exploding arms'. A piggyback loan is a second mortagage enabling a borrower to buy a house with little or no equity. 'NINJA' is an acronyn for borrowers with no income, no job, or assets while 'exploding ARMS' are mortgages with initial low, fixed interest rates which escalate to a high floating rate after a period of 2 or 3 years.
The US sub prime rate crisis is a result of a vicious circle where all involved have to take the blame and responsibility, be it the borrower, lender, investor, advertiser, people who rate the quality of the mortagages and even the regulator and market (both US/global - as they purposely failed to see this crisis coming).
Actually Indian market unlike the other big global financial markets have been fairly insulated from this crisis as we do not have any sub prime rates as such and our central bank - RBI(Reserve Bank of India) was quite proactive in seeing a prospective housing loan bubble or over heat happening in the near term and quickly took steps to correct them.
Thanks
Ajit
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