Banks not lending, realty sector suffers

Mumbai: The RBI lowered the risk weight age for banks to lend to the realty sector from 150 per cent to 100 per cent on November 15. One and a half months on, developers say, the move has still not translated to actual lending.

“The paramount issue is for financial institutions to lend. I think they have to lend selectively, it can’t be done across the board but funding should start happening now in a free flowing manner,” says CFO, Puravankara Projects, Ravi Ramu.

“When you talk about funding the real estate sector, except for a few large banks, the others get cold feet so therefore they need to be convinced of the project and understand real estate sector is now a priority sector,” says MD, Orbit Corp, Pujit Agarwal.

The RBI also said that loans can be restructured till June 30 2009, but developers ask, why at all have a deadline for being tagged "npa(non performing asstes) defaulter".

Real estate is the only sector where companies bear the brunt of non performing assets even with a one day delay in repayment.

And that's not the end of their wish list, they say, home loan rates must be in the range of 7 per cent.

Developers say the government's push for incentives for rupees 20 lakh loans has little benefit as average price for most leading companies is rupees 30 lakh upwards.

And that's the segment, developers believe, the goodies should flow in for in the second leg of the package.

However, the second stimulus package is likely to come out in the next few days. Planning commission deputy chairman Montek Singh Ahluwalia said the package is aimed at spurring economic growth in the wake of the global financial crisis.

He said the world economy was going to be worse next year so the government is preparing a stimulus package for next year also he also added that the aim was to prepare a suitable fiscal strategy both for this year and next year.

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