MUMBAI: The Reserve Bank’s decision to link disbursal of home loans with stages of construction has received a mixed reaction from the industry, as some believe the move will streamline the sector while others worry it will impact delivery of projects.
“We welcome this move as it aims at protecting the interest of consumers, banks and developers simultaneously in the long run. It will also reduce the risk of customers and banks as money won’t get diverted to other projects. So, the ongoing project will not be affected,” National Real Estate Developers’ Council Vice-president Sunil Mantri said.
The RBI notification follows the introduction by some banks of “innovative housing loan schemes” like 80:20 and 75:25 in association with developers or builders, where upfront disbursal of housing loans is made to builders without being linked to the various stages of construction.
The central bank had said such home loan products are likely to expose banks and their borrowers to additional risks.
Jones Lang LaSalle Managing Director Capital Markets Shobhit Agarwal said: “This move is aimed at protecting the interest of property buyers who are not aware of the long-term financial implications of such and similar schemes. It is definitely meant to advance the cause of greater transparency in the Indian real estate sector, and also to protect the financial institutions that provide funding in it.”
Parsvnath Group Chairman Pradeep Jain said: “It (RBI step) will help streamline the sector and will curb delayed deliveries of projects. This will also restrict developers from diverting the 80 per cent of loan amount to other project.
The developer will have to maintain time line for construction in order to get the next installment from bank.”
Criticizing RBI’s decision, Amit Enterprises Housing Chairman and Managing Director Kishor Pate said: “This can prove to be yet another blow to the residential real estate industry. Many developers have been banking on funds generated by these schemes to complete and deliver their projects.
“Established developers with the capacity to complete projects on the basis of their own resources and traditional funding will still be able to honor their commitments to their customers.
“But the shake-up that the industry is experiencing now is going to make it very hard for new entrants to gain a foothold,” Pate said.
CBRE South Asia Chairman and Managing Director Anshuman Magazine said: “it will disallow banks from granting loans for under-construction projects through innovative schemes, which will thus adversely affect the sale of projects where such schemes were prevalent.” -PTI
