Finance Minister P Chidambaram on Monday ruled out any quantitative ceiling on home loans and said interest rates would moderate in tandem with inflation.

“There is demand for housing loans... We cannot have quantitative ceilings for housing loans, because there is aspiration (for homes),” he said.

He was responding to a query if there was an effort by the government and the Reserve Bank to moderate the growth in housing and consumer loans.

“I do not think that it is right to put restrictions on housing loans. Since there is a rather high growth, it could lead to a bubble. The RBI was right in increasing risk weight and making some regulatory prudential requirements to cool down the sector,” the minister said.

He pointed out it was not for the first time that interest rates had gone up. In 1999-2000 and 2000-01 also, interest rates were high.

“What you need to look at is the real interest rate. With inflation around 6 per cent, it works out to be only 6 per cent. When inflation comes down, interest rate will also come down,” he reasoned.

RBI had taken some policy initiatives to moderate over 30 per cent growth in housing and consumer finance. Some of the leading financial institutions and banks have also reported a fall in disbursal of such loans.

“It seems to go down for a couple of weeks and it goes up up for a couple of weeks. Partly it is also seasonal,” because of the monsoon disruptions,” the minister said.

Unless there was a stable and clear trend for at least six to eight weeks it would be too early to come to any conclusion, he added.