HDFC chairman Deepak Parekh
MUMBAI:HDFC chairman Deepak Parekh has called for an end to the ban on loans for acquiring property for development. According to Parekh, easing finance to developers would help bring down cost of houses.
"In 2006, the regulators prohibited banks and HFCs (housing finance companies) from funding land transactions. Such actions may be justifiable when there are fears of asset price bubbles. Over two years ago, the regulators reduced risk weights on exposures to commercial real estate-residential housing. This signalled that there were no fears of any speculative bubble. Then, logically, the regulators now need to relax this near decade-old restriction. The regulators should, within limits, permit banks and HFCs to fund land transactions — or at least land transactions that are acquired specifically for residential purposes," said Parekh in his address to shareholders in the institution's annual report.
"This is a simple, doable solution. It will bring residential prices down, increase the stock of affordable housing and fulfill the aspirations of more Indians becoming homeowners. So the key question remains — will the regulators oblige?" Parekh asked.
Commenting on the government scheme to have housing for all by 2022, Parekh said that HDFC understood that housing is a unique asset and would work tirelessly towards this goal. Given that 600 million Indians are expected to be living in urban India by 2030, Parekh said that one of the key issues in housing is affordability in cities.
He added that one of the main reasons for the high cost of houses was that builders had to borrow at 18-24% through non-bank channels to fund land purchase.