Re­alty Sec­tor on Re­vival Path

A post grad­u­ate in Sta­tis­tics from Lucknow Univer­sity joined LIC in 1983, only be­cause it was the first job of­fer that came by his way. Af­ter more than 33 years with the com­pany Vi­nay Sah, CEO and Manag­ing Di­rec­tor - LIC Hous­ing Fi­nance Lim­ited (HFL) is s

Realty Plus - - Editor-In-Chief Note -

Avet­eran of the in­dus­try vi­nay Sah has ex­pe­ri­enced life in an up­scale metro to the most ru­ral re­gions of In­dia. No won­der, meet­ings with him have al­ways been an in­for­ma­tive af­fair. For in­stance, he men­tions a heart-warm­ing in­ci­dent that be­came the rea­son of his long as­so­ci­a­tion with LIC. “It was around 1984 that I was on tour to Jag­dalpur and was asked to present the in­sur­ance cheque to a widow dur­ing a death claim presentation in the re­mote vil­lage. While hand­ing over the cheque of lit­tle more than Ru­pees Ten Thou­sand, in the few sec­onds of eye con­tact the grat­i­tude that I saw made me re­al­ize that this job was more than just work, it of­fered me an op­por­tu­nity to make a dif­fer­ence in the lives of many,” he told.

vi­nay Sah when ini­tially joined LIC he worked at divi­sional of­fice and was in charge of new busi­nesses and the plan­ning de­part­ment which ex­isted only for five years in the or­ga­ni­za­tion from year 1982. “In 1980, LIC un­der­took mas­sive de­cen­tral­iza­tion ini­tia­tive. Till then all pro­cesses were done at divi­sional of­fices man­u­ally.. For ex­am­ple loan pa­pers from branch of­fice would travel phys­i­cally to the divi­sional of­fice and then back, would take a long time. In 1985, I worked as a pro­gram­mer and then in HR de­part­ment for a while. From about year 1988-89 to 2008, I was in mar­ket­ing and one of the few to be in charge in all mar­ket­ing po­si­tions, be­com­ing ex­ec­u­tive di­rec­tor mar­ket­ing in 2015 with prod­uct de­vel­op­ment as part of my port­fo­lio,” he rem­i­nisced.

Talking about the real-estate sce­nario to­day he felt that the in­fras­truc­ture sta­tus to af­ford­able hous­ing which was long on the wish list of the in­dus­try will give a ma­jor boost to the res­i­den­tial real-estate. vi­nay said, “De­vel­op­ers would be en­cour­aged as it will en­sure eas­ier ac­cess to in­sti­tu­tional credit and help in re­duc­ing bor­row­ing cost for af­ford­able hous­ing projects. With in­fras­truc­ture sta­tus ac­corded, ap­proval process for af­ford­able hous­ing projects would im­prove through the en­vis­aged sin­gle win­dow clear­ance. This would fur­ther sim­plify process, lay clear guide­lines and in­crease trans­parency. Also, with RERA, ac­count­abil­ity on the part of de­vel­op­ers will in­crease, thereby at­tract­ing debt and pension funds to in­vest in af­ford­able hous­ing seg­ment. For LIC HFL too, af­ford­able hous­ing is the fo­cus area for the cur­rent year. Our project fi­nance teams si­t­u­ated at var­i­ous lo­ca­tions have started iden­ti­fy­ing af­ford­able hous­ing projects for fund­ing. We price the loans at a lesser rate as com­pared to the other project fund­ing schemes.” There will be a per­fect syn­ergy be­tween bulk lend­ing to de­vel­op­ers and through their projects ex­pand the re­tail cus­tomer base.” Ac­cord­ing to vi­nay other pos­i­tives for the re­alty sec­tor have been the mea­sures like tweak­ing of the def­i­ni­tion of af­ford­able hous­ing projects from the ear­lier built up area to car­pet area that will in­crease the size of af­ford­able homes, al­low­ing 100% de­duc­tion of prof­its from tax and ex­ten­sion of time frame for project com­ple­tion from 3 to 5 years. “As we all know, af­ford­able hous­ing is fairly un­der pen­e­trated mar­ket in our coun­try de­spite pent up de­mand. The in­clu­sion of Mid­dle In­come Group (MIG I and MIG II) along with the LIG/EWS cat­e­gory un­der the PMAY CLSS will fur­ther pro­vide the im­pe­tus needed for de­vel­op­ing af­ford­able hous­ing projects in the coun­try. More or­ga­nized de­vel­op­ers will be at­tracted to­wards this seg­ment catalysing de­vel­op­ment and in­creas­ing the sup­ply of af­ford­able hous­ing stock in the coun­try.”

lic hfl has done well in project fi­nanc­ing across south­ern, Western and east­ern mar­kets dur­ing the last year. We have been able to grow the project loan port­fo­lio by 49% as of June’ 17 quar­ter.

im­prove­ment in lenders & buy­ers con­fi­dence The sec­tor was long plagued by the griev­ance of be­ing un­or­ga­nized and un­reg­u­lated. On ac­count of this, trust deficit al­ways pre­vailed in this sec­tor. vi­nay is of the opin­ion that RERA is a cus­tomer cen­tric reg­u­la­tion that will evolve over time and bring in a par­a­digm change. “The com­fort for lenders will go up as with the pas­sage of RERA, all per­mis­sions, sta­tus and the re­quired clear­ances would be avail­able on­line for scru­tiny. Es­crow mech­a­nism will ring fence any likely fund di­ver­sion by pro­mot­ers. Projects reg­is­tered un­der RERA would help lenders in tak­ing more in­formed de­ci­sions about the project, pro­moter’s back­ground, pric­ing ra­tio­nale and the vi­a­bil­ity of the project within the time­frame com­mit­ted by pro­mot­ers. Projects reg­is­tered un­der RERA only would be con­sid­ered for fi­nanc­ing by lenders. Also, due to RERA with in­vestor con­fi­dence re­turn­ing, we can see a re­vival mode in this sec­tor. This will chan­nel­ize more cap­i­tal in­flows in the sec­tor, re­sult­ing in the over­all de­vel­op­ment of the sec­tor.”

For de­vel­op­ers, LIC HFL of­fers con­struc­tion fi­nance both in sale model for res­i­den­tial projects and lease cum sale model in case of com­mer­cial projects. The com­pany has been ac­tive in fund­ing de­vel­op­ers but se­lec­tively de­pend­ing upon the project vi­a­bil­ity. vi­nay ex­plained, “Our due dili­gence process in­cludes checks and bal­ances in re­spect of de­vel­oper’s pro­file, past ex­pe­ri­ence, credit history, strength of bal­ance sheet, project cash flows and the mar­ketabil­ity of the project. With RERA kick­ing in, the credit ap­praisal has in­cluded whether the projects to be funded are RERA reg­is­tered. In case of com­pleted projects given on lease, we have LRD scheme where loans are given based on fu­ture rent re­ceiv­ables. Loan against prop­erty (LAP) is also avail­able for cor­po­rates for their busi­ness ex­pan­sion needs.” Mort­gage pen­e­tra­tion (hous­ing credit as a per­cent­age of GDP) in In­dia has re­mained close to 9%. The fac­tors that have sup­ported growth over the years are favourable de­mo­graph­ics with a large pro­por­tion of pop­u­la­tion be­low 30 years of age, in­creas­ing ur­ban­iza­tion lead­ing to pro­lif­er­a­tion of nu­clear fam­ily struc­tures and de­vel­op­ment

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