Banks want NPA norms to be relaxed for housing project loans

Sunday, 23 September 2012 18:40 Business Standard
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CREDAI representatives have informed the ministry that many projects could not be completed due to lack of funds

Following the finance ministry asking banks to boost up lending to the residential housing projects, the lenders now want the central bank to relax norms pertaining to asset classification to facilitate credit flow.

In a meeting held last week with bankers and real estate developers body Confederation of Real Estate Developer's Associations of India (CREDAI), DK Mittal, secretary, financial services had reviewed the issues pertaining to credit flow to the housing sector and discussed measures to boost the loan flow.

CREDAI representatives have informed the ministry that many projects could not be completed due to lack of funds. Most of these unfinished projects are in tier-II and tier-III cities.“We have noted that a developer starts the project by availing finance from non-banking sources, mainly non-banking housing companies, at a high interest. But later they have realized that it servicing such loans become unviable,” said a top executive from a public sector bank.

To add to the woes of real estate developers, Reserve Bank of India guidelines does not allow banks to take out that exposure from the NBFC if the project has not been commenced.

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