GRANTING FUNDS FOR DREAM HOMES

P K Gupta, Managing Director (Retail and Digital Banking) at SBI, shares the evolving trends of NRI home loans. Excerpts from the interview:

The year 2017 had been a historic one for real estate, with the implementation of RERA and uniform GST in April ’17. The industry this year is on a growth trajectory with increased accountability, transparency and delivery, making it attractive for end consumers. At SBI, we have seen an approximate 20 per cent increase in sanctions on a year-to-year basis. The industry registered a growth rate of approximately 14.7 per cent on a year-on-year (comparison of Industry Outstanding — June 2018 vs.

June 2017).

There has been a 9 per cent increase in primary residential sales for the top 8 cities on a YoY basis (Sep 2018), which shows recovery post implementation of RERA and GST. New launches at the top 8 cities has increased by 106 per cent in the first quarter, a very encouraging sign for the market.

Government initiatives to boost affordable housing through the Pradhan Mantri Awas Yojna (PMAY), conferring “infrastructure status” to this segment, and announcing various tax incentives are attracting investors and prominent developers to this segment. The Government has also recently increased the project cost to be eligible for priority sector lending under Home Loans that will encourage banks to go in for mid-segment housing loans.

Improvement in structural reforms, more liberalised FDI regime and the launch of Real Estate Investment Trusts (REITs) have increased the inflow of funds to this sector. Recently, the authority for environment clearance has been delegated to the local bodies for projects having more than 20,000 square metres and up to 50,000 square metres of built-up area. This initiative will reduce the gestation period for construction and eventually reduce housing prices.

SBI has introduced variety of products to cater to the needs of various subsegments and different clientele. We have also introduced Flexible Margin Schemes for the flats purchased from the projects are approved by us.

SBI has an exclusive product for NRIs, which is much in demand with the NRIs. We also have a large pool of approved projects all over the country wherein we have verified the title of the property. NRIs have the option to choose the best amongst these projects for buying the flats/villas.

There has been an increase in demand for Home Loans especially in the mid-segment.

a)

Implementation of RERA by the States has streamlined project approvals for builders, which has led to increase in new launches across the top cities in India.

Positive market sentiment due to increase in transparency and discipline in the market with the implementation of RERA and GST.

Affordable Housing has received a huge boost due to the Government’s focus on “Housing for all by 2022” and credit linked subsidy schemes available for

Modification of Insolvency and Bankruptcy Code (IBC) such that home buyers and allottees with the status of financial creditors has increased the accountability of developers.

b) c) d) e)

Home Loan market is very competitive and financial lenders Banks and NBFCs are offering Home Loans at attractive rates with customised schemes.

Increasing urbanisation and purchasing power has also led to an increase in demand for Home Loans.

It is also expected that this sector will incur more non-resident Indian (NRI) investments in both the short-term and the long-term. Bengaluru is expected to be the most favoured property investment destination for NRIs, followed by Ahmedabad, Pune, Chennai, Goa, Delhi and Dehradun.

f) a)

Focus on Affordable Housing. Big new developers with corporate pedigree such as Prestige, Tatas, Mahindra and Godrej are making a foray into real estate. This should further improve the quality of homes built.

Barrier for fly-by-night builders

b) c)

More transparency and greater consolidation

Home buyers will go to reputed builders with good track record for flats

Increased investment interest from Global investors, driven by increasing transparency and returns, private investments in the sector have surged. In 2017, India ranked 19th out of 73 countries in attracting cross-border capital to its property market. Further, Private Equity and Venture Capital investments in the sector reached $2.99 billion during January-August 2018.

d) e) a)

Mid and premium segments are likely to take off in a faster momentum. Housing projects exclusively for affordable segment and the Prime Minister’s on Housing for All by 2022 will be coming up in a big way. Priority sector lending as a percentage of total lending to housing will improve.

PMAY will be pushed aggressively in all the four verticals.

Sector likely to contribute 13 per cent to GDP growth in 2025.

Realty market to touch $180 billion in 2020 and create employment (direct

b) c) d) e) f)

and indirect) for 12.2 million people.

Growth from here forward, will be sustainable and marked by stronger market fundamentals.

g)

We have many customers applying for NRI Home Loans and recorded more than 14 per cent growth on a YoY basis. We have more than 90 specialised branches to cater to NRI customers, who are also extending Home Loans to serve all our NRIs. We also have a team of dedicated relationship managers stationed in our foreign offices and exchange companies managed by SBI and with whom we have agency arrangement, who are also sourcing the home loan applications in the Middle East to serve our large diaspora there. We have dedicated sales teams in each state to attend to the Home Loan needs of NRIs. The applications are then forwarded to the NRI branches for further processing. The Global NRI Centre at Kochi will be in a position to assist the NRIs in identifying the branches, which will be better to handle the home loans of NRIs.

Dubai and Abu Dhabi representative offices mobilise leads from the NRIs intending to buy houses/flats in India and direct them to the specialised branches.