HDFC, Axis seek one-time recast of loans for realtors
MUMBAI: Lenders should be allowed one-time restructuring of loans extended to some stalled real estate projects without having to mark them as non-performing assets (NPAs), said Deepak Parekh, chairman, Housing Development Finance Corp. Ltd, on Wednesday.
“We can overcome this crisis of confidence if lenders are allowed a one-time restructuring of certain real estate loans, particularly for stuck projects where building approvals have been delayed. If these restructured accounts are considered as standard assets for a period of say, 12 months, lenders will stop being so diffident,” Parekh said at the Indian Mortgage Leadership Conclave organised by India Mortgage Guarantee Corporation.
Parekh said that such a concession was given by the Reserve Bank of India (RBI) in 2008, which helped revive sentiment. Restructuring will enable lastmile funding even in assets that have slipped because of tight funding conditions and ensure that these projects are completed, he said.
Axis Bank managing director and chief executive officer (CEO) Amitabh Chaudhry agreed there was a need to help projects that are stuck in 60%-plus construction progress. In such cases, lenders are neither able to invest more nor are developers able to construct and finish the project without further investments.
“We need to have a mechanism where lenders can look to restructure these assets, lend more with stronger governance, end use monitoring and look to complete the projects. The fine print of government schemes on this is awaited, we should be able to see the industry making progress once it rolls out,” he said.
Chaudhry said there is a need to improve the resolution infrastructure for real estate projects. Lenders are unwilling to lend to projects held up in the National Company Law Tribunal for fear of bad loan classification.
“We welcome RBI’s move to link floating rate loans to external benchmark for customers. While the move shall result in customers getting faster transmission of loans in case of falling benchmark rates, this shall also result in faster increase in loan tenures/EMIs in case of increasing benchmark rates which could result in payment shocks to the borrowers. There have been periods in the last decade where key external benchmark rates have moved up by 200 basis points,” Chaudhry added.
However, State Bank of India chairman Rajnish Kumar had a different view, insisting the finance and property sectors must fix the problems.
“If you are a housing finance company, be a housing financier.
Else be a developer finance company. Everybody drew comfort when the money was lent to HFCs. However, that turned otherwise and that’s where the problem lies. Earlier, HFC was giving 75% of their total loans to retail loans. Rules changed and it reduced to 50% of the total loans,” he said.
Kumar also said that many problems in real estate have to be solved by the industry itself. “Who told developers to take out money for this project and invest in buying land or for your luxuries? This isn’t the government’s problem. This is created by the developer community. How can you expect the government to set it right? We will have to set it right,” he said.
Stating that Reits (real estate investment trusts) are emerging as a preferred alternative investment avenue for realtors, Parekh said, “it is estimated that $20-25 billion can be raised by commercial developers over the next three to four years”.
Calling for cross-border securitisation given the scale of resources required for housing finance, Parekh rued that reverse mortgage, which enables senior citizens to convert their homes into a monthly stream of income, is yet to take-off in the country.
PTI contributed to this story.
SBI CHAIRMAN RAJNISH KUMAR SAID THE FINANCE, PROPERTY SECTORS MUST FIX THEIR OWN PROBLEMS