A recent directive by the
Reserve Bank of India (RBI) to banks has added to the woes of the
realty sector , which has already been impacted by high interest rates and poor sales.
The directive has cautioned banks against lending to the sector and also urged them to check the balance sheets of developers as well as valuations quoted by them carefully before sanctioning loans.
A lot of frauds have been committed by borrowers who submitted forged documents that were certified by independent agencies or chartered accountants, the central bank observed. "In case of loan against the security of land, banks may also seek reports from local revenue authorities regarding the title deeds before sanctioning the loan," RBI said in a notice to chairpersons and chief executive officers (CEOs) of banks.
"Wherever documents of title are submitted as security for loans, there should be a system where documents of title are subject to verification regarding their genuineness, especially for large-value loans," RBI said in a notification last week.
The notification was the direct fallout of developers quoting very high property valuations and has had an immediate impact on the sector, which is already parched for funds because of low sales and a high debt portfolio.
Investing in realty? Check property rates "Banks have in the last six months been cautious about lending to the realty sector because of the various scams surrounding it. Now, after the RBI directive, banks are keeping realty companies at bay," said a senior official of the State Bank of India. The bank has already rejected half-a-dozen loan requests from various developers in the last week itself. Similar views were also aired by officials of other banks.
"We are very cautions in sanctioning loans to realty companies and also while giving home loans. We are sanctioning loans only to developers whose track records are very clean. These days we are avoiding sanctioning big-ticket loans to developers. We have rejected a couple of loan requests after the directive and are carefully examining the balance sheets of companies," an official of Punjab National Bank told Mail Today.
People applying for home loans are also feeling the impact. Banks said that they are lending only to those buyers who have a very clean track record and a high capability to repay the loans.
Developers confirm that banks have become cautious in lending to the sector. "Banks are extremely cautious and selective in lending money to real estate players. Only a few players, who have good track records in terms of repayment of loan and overall past experience are being lent money by the banks," said Naveen Raheja, chairman and managing director, Raheja Developers.
"The banks are not lending to troubled projects or to developers who have a record of delays or have a large debt portfolio," Raheja added.
As most of the developers are facing difficulty in getting funds for construction, they are opting for plot sales. Even large developers such as DLF, Unitech, Sobha, and Lodha Developers are selling plots instead of developed land to generate funds.
Courtesy: Mail Today
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