IBA asks PSBs to help realty cos finish projects
The Economic Times, April 12, 2009, Page 5
ON A CASE-TO-CASE BASIS, BANKS COULD DECIDE ON FURTHER FINANCIAL HELP
Our Bureau NEW DELHI
IN A sign of relief for cash-strapped realty companies facing tight credit situation, Indian Banks Association has told public sector banks to consider extending financial assistance for incomplete projects. A large number of real estate projects are stuck as demand for homes and offices have dried up and credit availability is extremely tight for property companies.
“The committee (managing committee of IBA) took a view that banks, which had already extended finance to projects, which are incomplete, could, on a case-to-case basis decide on the need to extend further financial assistance to bridge funding gap for completion of the projects,” said IBA in a letter to Confederation of Real Estate Developers’ Association of India (Credai). IBA members include banks from both public and private sectors.
Credai chairman Kumar Gera said IBA’s move will help ease liquidity situation for real estate developers. Added NCR-based ATS Infrastructure MD Getamber Anand: “It’s a chicken and egg situation for real estate developers today. Since developers don’t have enough liquidity, they can’t construct, which forces home buyers to stay away from the market adding to liquidity woes. If bank finance is made available, builders will be able to construct and that will give buyers a confidence to put in money in realty projects.”
Mr Gera says IBA’s letter is carefully worded and it will depend on how different banks follow it. Banks have been very cautious about lending to real estate sector and whenever they are making loans, it is on higher interest rates and against increased collaterals.
“Developers are paying interest at an average rate of 17% for any loan from banks these days. This rate is unaffordable especially since property prices have fallen,” says Mr Gera.
In December, Reserve Bank of India(RBI) had allowed restructuring of loans for commercial real estate, following which several realty firms have got their loans restructured. “Getting a loan restructured is not at all easy. Banks are charging a very high processing fee and even raising interest rates for the restructured loans,” says Pune-based Kumar Builders chairman Lalit Kumar Jain.
The Economic Times, April 12, 2009, Page 5
ON A CASE-TO-CASE BASIS, BANKS COULD DECIDE ON FURTHER FINANCIAL HELP
Our Bureau NEW DELHI
IN A sign of relief for cash-strapped realty companies facing tight credit situation, Indian Banks Association has told public sector banks to consider extending financial assistance for incomplete projects. A large number of real estate projects are stuck as demand for homes and offices have dried up and credit availability is extremely tight for property companies.
“The committee (managing committee of IBA) took a view that banks, which had already extended finance to projects, which are incomplete, could, on a case-to-case basis decide on the need to extend further financial assistance to bridge funding gap for completion of the projects,” said IBA in a letter to Confederation of Real Estate Developers’ Association of India (Credai). IBA members include banks from both public and private sectors.
Credai chairman Kumar Gera said IBA’s move will help ease liquidity situation for real estate developers. Added NCR-based ATS Infrastructure MD Getamber Anand: “It’s a chicken and egg situation for real estate developers today. Since developers don’t have enough liquidity, they can’t construct, which forces home buyers to stay away from the market adding to liquidity woes. If bank finance is made available, builders will be able to construct and that will give buyers a confidence to put in money in realty projects.”
Mr Gera says IBA’s letter is carefully worded and it will depend on how different banks follow it. Banks have been very cautious about lending to real estate sector and whenever they are making loans, it is on higher interest rates and against increased collaterals.
“Developers are paying interest at an average rate of 17% for any loan from banks these days. This rate is unaffordable especially since property prices have fallen,” says Mr Gera.
In December, Reserve Bank of India(RBI) had allowed restructuring of loans for commercial real estate, following which several realty firms have got their loans restructured. “Getting a loan restructured is not at all easy. Banks are charging a very high processing fee and even raising interest rates for the restructured loans,” says Pune-based Kumar Builders chairman Lalit Kumar Jain.
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