‘Don’t give loans for 80:20 schemes’

RBI’S direc­tive to banks aimed at pro­tect­ing buy­ers’ in­ter­ests

HT Estates - - Front Page - Van­dana Ram­nani

In or­der to pre­vent In­dia’s own sub­prime cri­sis, the Re­serve Bank of In­dia has ad­vised banks to link the dis­bur­sal of home loans to stages of con­struc­tion in or­der to pro­tect the in­ter­est of buy­ers and con­tain the fall­out of “in­no­va­tive” hous­ing fi­nanc­ing schemes, pop­u­larly known as 80:20 and 75:25 schemes.

Up­front dis­bur­sal “should not be made in cases of in­com­plete/un­der­con­struc­tion/green­field hous­ing projects,” an RBI no­ti­fi­ca­tion has said, adding that such home loan prod­ucts are likely to ex­pose banks and their bor­row­ers to ad­di­tional risks. The RBI direc­tive is likely to hit the real­tors hard, es­pe­cially those who are de­pen­dent on th­ese schemes to boost sales when de­mand is low and to raise funds for con­struc­tion through buy­ers as res­i­den­tial loans.

“The RBI de­ci­sion is coun­ter­pro­duc­tive and will push the real es­tate sec­tor into a fi­nan­cial cri­sis. The cus­tomer for whose in­ter­est the de­ci­sion is aimed at, is go­ing to be the great­est suf- ferer as the only source of funds so far avail­able to the de­vel­oper will be de­nied. This will leave many real es­tate projects in the lurch,” says R K Arora, CMD, Su­pertech Limited. Some banks of­fer “in­no­va­tive hous­ing loan schemes” in as­so­ci­a­tion with de­vel­op­ers/builders, where a hous­ing loan is dis­bursed up­front to builders with­out link­ing it to the var­i­ous stages of con­struc­tion. In many in­stances, even the in­ter­est/EMI on the loan is ser­viced by the builder dur­ing the con­struc­tion pe­riod.

“I think this is a great and timely move by the RBI, as at this stage, there are not many play­ers of­fer­ing such prod­ucts and I feel that such a move will pro­tect the cus­tomer and the sys­tem from any is­sues which may arise later,” says Keki Mistry, vice-chair­man and CEO, HDFC.

HDFC chair­man Deepak Parekh too, in his an­nual state­ment to the com­pany’s share­hold­ers in June this year, had spo­ken out against such schemes.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.