Banks not uniform in funding policy to real estate

Venue—Hotel Kohinoor Continental

Moderator—Pranay Vakil, Chairman, Knight Frank India

Panelists—Kruti Jain, Director, Kumar Urban Developers

Sunil Dahiya, MD, Vigneshwara Developers

Atul Modak, Head, Kohinoor City

Ravi Sinha, CEO & Managing Editor, Track2Realty

Sunil Dahiya: I have a copy of the circular which PNB got from the RBI and probably the managers are interpreting that in their own way. Now the circular that has been shared by the HO with the managers says that they will not take any exposure in housing loans, not even non-fund based. And if it is happening at bank manager level to the consumer, and although we are not directly involved with this situation as developers, but if the consumer does not get a line of credit, how will they buy a house.

Kruti Jain: That is what SLR is all about, the Statutory Liquidity Regulator. If the bank has already overshot it, they are under scrutiny immediately and that includes the home loan aspect. So normally what the banks do is that they keep a limit to the exposure in real estate. As an industry you cannot get more than Rs 1000 crores, unless there is additional security they cannot lend you more money. It could be because of that. And PNB is in more than 80 destinations in India, would have felt that their exposure is too big and they might have to give additional security. So as an individual bank or as a cluster of banks would have taken this reaction in market where they are prevalent and have a very strong presence. In market like Pune, which are not their best market, they will still be running around aggressively to developers to give them construction loans.

Pranay Vakil: So, quite the reverse is also true. The same RBI is saying that certain kinds of housing loans would fall in the priority lending and there will be a 1.5% rebate on the interest rate. So it is not like the RBI is stopping these bankers from lending money, but like Kruti said, each banker is in a different position and if you have to conform to a particular guideline by Friday, they will freeze the fresh loans.

Can we for a moment digress? All of us recognize it is a problem of raising money. But can we for a moment look at how other countries have solved the problem? And is it possible we can emulate some of those things?

Sunil Dahiya: I will differ with you here. You see what happens is certain concepts which are immediately included without thinking are actual failures over here. Why I am saying so is, just pick up a small thing, the BRT corridor. It is an imported thing and put it in the center of Delhi. What happens is, certain banking products which are working in Singapore or Europe are very localized. When the subject of real estate is localized, financing is also localized. And the environment is different, the eco system is different.

Pranay Vakil: I was referring more to REIT like products. It has been blocked by the bankers’ lobby. They know if the REIT comes in, the real estate developers will never touch the banks.

……to be continued