Is the fixed 9.5% rate for home loans justified?

My previous post talks about the new government regulation where home loans below Rs20 laks will be available at lower than market rates at 9.5% (Read here). On second thoughts I was wondering whether it is fair on the PSU banks to provide loans at such a cheap rate. The gainers will be home builders who have till now made millions by charging exhorbitant rates for their properties. The losers will be banks whose profitability will be eroded or the government will bear the losses through subsidies. Hence, in this case private realtors will bag the profits and government will bear the losses! Should'nt the real estate builders be asked to reduce prices of their flats/ houses/ villas that they have been selling at exhorbitant prices.

Secondly, why is the government supporting only the real estate sector. There are equally hit rate sensitive sectors like automobiles, construction etc. Why arent these being protected with impending bankruptcies in US of the 3 auto majors - GM, Ford and Chrysler. Is it because real estate contributes over 10% to GDP with its forward and backward linkages with steel, auto, construction sectors etc. Then sectors like textile need equal attention as they generate employment. What about banking? A banking sector collapse can send ripples across the economy.

Lets see what measures are further taken by the government to prop up the economy or more specifically the stronger lobbying sectors!