“It is not ad­vis­able for first time home­buy­ers to spend their sav­ings on un­der­con­struc­tion projects”

Hindustan Times (Chandigarh) - Estates - - FRONT PAGE - Nam­rata Kohli feed­back@livemint.com n

Home­buy­ers must be cau­tious and in­stead of tak­ing a high risk, should pay a pre­mium and go for ready-to­move-in prop­er­ties, says Ra­jnish Ku­mar, Man­ag­ing Direc­tor (Na­tional Bank­ing Group) of State bank of In­dia (SBI). Ku­mar has been with the SBI for over three decades and has vast ex­pe­ri­ence in hand­ing large credit, project fi­nance, for­eign ex­change and re­tail bank­ing. He spoke with Nam­rata Kohli on a num­ber of is­sues. Edited ex­cerpts:

Is it true that RERA com­pli­ance is a must for builders to avail bank loans? How does it safe­guard the in­ter­est of the banks?

Yes we will fi­nance only those projects that are RERA com­pli­ant. RERA is good for the in­dus­try and the mar­ket both. With cur­rent reg­u­la­tions of RERA and in­sol­vency, the risk of buy­ing has come down.

NCLT re­cently ad­mit­ted a plea by bankers to start in­sol­vency pro­ceed­ings against Jaypee In­frat­ech. In this par­tic­u­lar case, how will this pan out for home­buy­ers who got their flats fi­nanced through home loans?

Ac­cord­ing to me, it should not be only the home­buyer’s obli­ga­tion to pay. Putting them at par with the lenders would be fair. The home­buyer and lender are on an equal foot­ing and the loss to the project must be shared by the lender and the buyer. If the project loan has been given, eq­ui­table rights are there and losses should be shared.

What are the les­sons to be learnt for the lender and the buyer from this episode?

It is not ad­vis­able for the first time home­buy­ers to spend a life­time of sav­ings on un­der con­struc­tion project. If it was a ques­tion of pay­ing 5% it was dif­fer­ent but they have to pay 95%. Af­ter all it is their life’s sav­ings and in­stead of tak­ing a high risk, they should pay a pre­mium and go for ready to move in prop­er­ties. How­ever in­vestors take the risk if they wish to but not have sky high ex­pec­ta­tions as ear­lier. As for lenders they need to do their due dili­gence and go for cred­i­ble builders only.

RERA was in­tro­duced on May 1 and three months were given for reg­is­ter­ing of projects. How­ever, the re­sponse has been dis­mal in the Del­hiNCR area. What can this be at­trib­uted to?

State gov­ern­ments must move fast. They have to re­alise that the only di­rec­tion is to move for­ward.

You have been an ad­vo­cate of rent­ing vis­a­vis buy­ing a home. But in our coun­try, there is an em­pha­sis on buy­ing rather than rent­ing?

In most de­vel­oped economies, peo­ple buy to rent. And that is be­cause home fi­nanc­ing cost is much less. But with tax­a­tion and stamp duty be­ing high at 8-10%, the cost of own­er­ship of a home is very high in our coun­try. That makes it unattrac­tive to buy a home here. How­ever, there is a change in mind­set of the new gen­er­a­tion who do not mind stay­ing in good rented homes. In fact, there is a study that re­veals that in the next 20 years, no one will buy ei­ther a house or a car and opt for rented and hire op­tions.

What can be done to make pos­si­ble the PM’s vi­sion of af­ford­able hous­ing?

I feel there are three en­ti­ties that go into mak­ing a home – the first is land cost. Sec­ond is taxes which is high at 35%. And the third is the cost of bor­row­ing which is not phe­nom­e­nally high. The real sav­ings can be made in land and taxes. Land must be owned by gov­ern­ment au­thor­i­ties only then af­ford­able hous­ing is pos­si­ble. If a de­vel­oper builds pay­ing 35% taxes and comes with a re­turn ex­pec­ta­tion, af­ford­able hous­ing will never be pos­si­ble. Nam­rata Kohli tracks ev­ery­thing from House to Home, from real es­tate to in­te­ri­ors and cap­tur­ing key trends in prop­erty mar­kets in In­dia and glob­ally

Ra­jnish Ku­mar

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