RBI move may spoil the party for realty players
The banking regulator said interest subvention schemes were basically classified as mortgage and not construction finance. They were risky businesses and required higher provisioning.
Sep 05, 2013
Source : The Hindu

What is the scheme?

The 80: 20 or interest subvention schemes are a form of financing home loans and have been part of residential real estate segment in the last few years. Under such schemes, the interest/EMI on the housing loan availed of by the individual borrower is serviced by the builder during the construction period.

RBI, in its recent notification, came down heavily on such schemes, stating that the interest subvention schemes were basically classified as mortgage and not construction finance. The banking regulator said such loans were risky businesses and required higher provisioning. The builder, too, gains as home loans are far cheaper than construction loans.

The 80: 20 scheme has been the highest in the Rs 45 lakh to Rs 1 crore residential real estate bracket or mid-tier segment.

Anshuman Magazine, CMD, CBRE, South Asia, said, “The RBI’s decision to disallow banks from granting loans for under-construction projects through innovative schemes will adversely affect the sale of projects.”

“The RBI has reacted sharply to the fact that a number of banks and housing finance companies are promoting home loan products such as the 80:20 or 75:25 schemes, which involve tripartite agreements involving lenders, developers and property buyers. This move is aimed at protecting the interest of property buyers who are not aware of the long-term financial implications of such and similar schemes,” Shobhit Agarwal, MD, Capital Markets, Jones Lang LaSalle India, said.

Several small and big players had launched the scheme.

Banking sources told Business Line that at least 10 leading banks were offering the interest subvention scheme. The RBI has also asked banks to link the disbursal of home loans to stages of construction to protect the interests of buyers.

Several realty players said they had witnessed a rise in sales after introducing the scheme. Pradeep Jain, Chairman, Parsvnath Group, said his company had witnessed a good response but claimed their scheme was different.

Developers said that the move will put brakes on future growth of the sector.

Navin Raheja, President, National Real Estate Development Council, said, “Normally, these schemes are offered by builders on projects under construction or about to complete. This decision will add more problems to the real estate sector, which is already struggling in the current scenario.”

R K Arora, CMD, Supertech, said, “The decision is counter-productive and has come at a time when home interest rates and increased property prices are high due to rising cost of raw materials.”

Latest Realty News

Gen Y techies who invested in Bangalore 15 years ago now finding it difficult to service their home ...
Sep 05, 2013
BANGALORE: Economic slowdown has cast a shadow on Bangalore's housing market, with the rising cost of living and poor salary increments forcing an increasing number of IT professionals in the city to put their upscale homes on sale.
Cushman & Wakefield buys out talent pool of Lemongrass Advisors
Sep 05, 2013
KOLKATA: Global property consultant Cushman & Wakefield (C&W) has acquired the entire team of Lemongrass Advisors, a city-based real estate consultancy firm, for an undisclosed amount. The buyout, which comes close on the heels of C&W's acquisition of Singapore-based project management company Project Solution Group two months ago, is aligned with its global strategy to strengthen operations — both organically and inorganically — in the Asia Pacific.
Mixed views on linking home loans to stage of construction
Sep 05, 2013
MUMBAI: The Reserve Bank's decision to link disbursal of home loans with stages of construction has received a mixed reaction from the industry, as some believe the move will streamline the sector while others worry it will impact delivery of projects.
Cushman strikes unique takeover deal to bypass hurdles
Sep 05, 2013
KOLKATA: Global real estate advisor Cushman & Wakefield today claimed it carried out a unique acquisition model, for the first time in India, for another city-based real estate advisor company Lemongrass Advisors.
Land deal: Salim Raj moves HC
Sep 04, 2013
KOCHI: Salim Raj, the suspended gunman of Chief Minister Oommen Chandy, on Tuesday approached the High Court challenging the single judge’s order directing the State Police Chief to take steps to seize the telephonic records of persons allegedly involved in land deal cases. In his plea, Salim Raj stated that there was no criminal case registered in connection with the land deal case, hence the order was not sustainable.
Notice issued to Asaram ashram near Bhavnagar
Sep 04, 2013
RAJKOT: Bhavnagar Area Development Authority (BUDA) on Tuesday issued a notice to Asaram ashram in Lakhanka village near the city for land encroachment.
Property fraud cases to now get solved easily
Sep 04, 2013
NOIDA: From now on, cases of forgery related to registration of land and property in Gautam Budh Nagar can be resolved at the department of stamps and registration in Noida. Earlier, complainants had to move various courts to adjudicate these matters, which often stretched on for several years owing to pendency of cases.
Realtors get notice for flouting groundwater ban
Sep 04, 2013
NOIDA: Officials of Noida Authority on Monday held a meeting with realtors to decide the course of action in the cases filed in the National Green Tribunal (NGT) regarding construction around Okhla Bird Sanctuary and extraction of groundwater at various sites.
Ingersoll Rand working on Nano homes
Sep 04, 2013
PUNE: Industrial technology major Ingersoll Rand is working on a new “Nano-like” concept for dwellings which will be small, affordable and sustainable, Venkatesh Valluri, Chairman and President has said.
Property expo in Kochi
Sep 04, 2013
KOCHI: IndiaProperty.com is organising the second edition of Gruhapravesham 2013, the property show in Kochi, from September 6 to 8 at Jawaharlal Nehru Stadium.

Latest Realty News Of State

Realty Talk's