The practice of
housing project developers using real estate loans meant for one project to
kick-start other projects came into sharp focus at a meeting of bankers
convened by the Finance Ministry in Mumbai.
This tendency of
builders to launch other projects when the earlier ones were not complete has
caught the eye of bankers.
On the issue of there
being no thaw in property prices despite slowdown in sales, bankers said those
who invested in housing projects or / bank-rolled them at the pre-launch and launch
stages were preventing builders from bringing down prices.
The meeting, which
was presided over by Mr. D.K. Mittal, Secretary (Department of Financial
Services), Ministry of Finance, comes in the backdrop of reports about the
existence of large number of unsold flats with builders / or developers in cities such as Mumbai.
The issue of unsold
flats with developers / or builders was flagged at a review meeting of public
sector banks last month (August 2012) in New Delhi.
At the Delhi meeting,
Finance Minister Mr. P. Chidambaram
observed that when there is sufficient demand for dwellings in the cities, the
presence of unsold flats amounted to blocking of capital.
Mr. Chidambaram said
unsold flats should be a matter of concern for bankers who have funded the
builders and developers, on the one hand, and property buyers, on the other.
The refusal of
builders / or developers to reduce prices was cited as the main reason for
flats remaining unsold.
If they bring down
prices by 15-20 per cent, it should be possible to find ready buyers. The sale
of such flats could provide a much-needed demand to push to the economy.
At the Finance
Minister Mr. Chidambaram’s behest, the IBA (Indian Banks’ Association) has
formed a committee under the leadership of
Mr. Ajai Kumar, Chairman & Managing Director, Corporation Bank, to
look into the issue of unsold flats with builders / promoters holistically
The IBA
committee will also examine ways to put pressure on builders / promoters to
bring down prices & popularise home loan schemes through incentives.
SrC: BL
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