SME Times is powered by   
Search News
Just in:   • Monetary panel minutes signal a hawkish RBI in the offing  • IMF urges US to cut debt, deficit  • China mulls anti-dumping measures on synthetic rubber imports  • PNB's 'Mission Gandhigiri' to help recover Rs 1,800 cr  • SA leader leaves Commonwealth summit to deal with protests 
Last updated: 16 Apr, 2018  

Housing.9.Thmb.jpg Banks hesitant to lend for affordable housing despite infrastructure status

Housing.9.jpg
   Top Stories
» Modi's visit to strengthen India-UK trade: Industry
» Assocham-Deloitte study for integrated end-to-end logistics
» Urban population contributes more than half to GDP
» India-UAE skill mapping and HR conference in Dubai on April 22
» Delayed GST refund to exporters: Prabhu to raise issue before FinMin
SME Times News Bureau | 16 Apr, 2018
The affordable housing segment, which is the new rage in the real estate sector after it got infrastructure status last year, still suffers from lack of funds from banks. Market participants feel they still have to wait a few more months before banks embrace such projects.

Infrastructure status for the segment was announced by Finance Minister Arun Jaitley in his Budget speech for 2017-18 on February 1, 2017, which allowed builders to borrow from banks at cheaper rates compared to the conventional lenders such as private equities.

"That (infrastructure status) means they (developers) should have been able to access a lot of funds at cheaper rates... but that's not happening. And that's not happening anywhere," said Jayashree Kurup, Head of Content and Advisory, at the property consultant website magicbricks.com .

She added: "It has not translated into anything on the ground, except may be a boost in sentiment."

Most market participants blame it on the credibility crisis brought about in the past few years by the slump and lack of sales and delivery of apartments to end-users.

"Construction finance has not been doing well -- essentially because of the fact that the sales have not been good," Shrikant Srivastava, Chief Risk Officer, India Mortgage Guarantee Corporation, told IANS.

Srivastava, who has also served as the Chief Risk Officer at PNB Housing Finance, further said: "All lenders have burnt their fingers in doing construction finance because projects did not get completed, sales did not happen, and therefore the loans they had taken, they could not pay back."

In the affordable housing space, bankers want to do projects, but as lenders have suffered losses in the prime segment, bankers were shying away from giving construction finance for the segment, he added.

Ankur Dhawan, Chief Investment Officer, PropTiger.com, said: "Bank funding is a problem for the overall real estate sector and is not limited only to affordable housing. The sector has seen too many NPAs (non-performing assets) which makes banks cautious in funding this sector."

Aditya Kedia, MD of Mumbai-based Transcon Developers, attributed the lack of interest of banks in the sector to the inexperience of the banks in working with realtors.

"Even for the banking institutions, it is a new field; so the primary concern these people (banks) have is that since these are smaller-sized apartments, people buying them probably are from the lower income bracket," he said.

Market players, however, feel this lack of trust between the banks and developers would wane in a few months.

Kedia was of the opinion that "it is a learning process for both, the developers as well as the banking sector, and I think it will take six to eight months for it to be understood well".

J.C. Sharma, Vice Chairman and MD of the Bangalore-based Sobha Ltd, however, contended: "If you (developers) have a good track record in operations, there are no dearth of lenders... even from the banks."

In view of the recent frauds, mismanagement and rising NPAs, "lending has to happen with far more scrutiny and better processes than what it used to be -- and we should welcome it from a systemic benefit point of view," he opined.


 
Print the Page Add to Favorite
 
Share this on :
 

Please comment on this story:
 
Subject :
Message:
(Maximum 1500 characters)  Characters left 1500
Your name:
 

 
  Customs Exchange Rates
Currency Import Export
US Dollar
66.20
64.50
UK Pound
87.50
84.65
Euro
78.25
75.65
Japanese Yen 58.85 56.85
As on 20 Apr, 2018
  Daily Poll
Is counterfeiting a major threat to SMEs?
 Yes
 No
 Can't say
  Commented Stories
» Starting an import export business: Basic guide for beginners(49)
» Startup India has created large-scale jobs: Commerce ministry(4)
» Banks need to speed up MSME loans under PMEGP: Govt(3)
» New MSME definition(2)
» Three years of Mudra(2)
 
 
About Us  |   Advertise with Us  
  Useful Links  |   Terms and Conditions  |   Disclaimer  |   Contact Us  
Follow Us : Facebook Twitter