Criticising the
Reserve Bank of India's (RBI) decision to link disbursal of housing loans to
stages of construction, real estate apex body CREDAI - Confederation of Real Estate Developers' Associations - said the move will harm
developer sentiment and disturb business plans.
RBI recently asked
banks to link the disbursal of housing loans to stages of construction to
protect the interests of buyers & contain the fallout of
"innovative" housing financing schemes.
It has directed banks
that upfront disbursal "should not be made in cases of incomplete / or
under-construction /or green field housing projects".
CREDAI Chairman Mr. Lalit Kumar Jain said:
"Housing finance institutions (HFCs) or / banks normally safeguard their
interest while devising such instruments. Abruptly issuing such circulars,
advising bank against established practices only harm the sentiment and
disrupts business plans. This will create setback for projects, affecting the
end consumers.The 80:20 scheme is limited to few cities and projects. He feels
the RBI should have had taken the industry’s view into consideration before
issuing the order. "The metro city projects will be impacted most by the
RBI policy"
The notification
follows the introduction by some banks of "innovative housing loan schemes"
in association with developers or / builders, where upfront disbursal of
housing loans is made to builders without being linked to the various stages of
construction.
"In view of the
higher risks associated with such lump-sum disbursal of sanctioned housing
loans and customer suitability issues, banks are advised that disbursal of
housing loans sanctioned to individuals should be closely linked to the stages
of construction of the housing project/houses and upfront disbursal should not
be made in cases of incomplete/under-construction/green field housing
projects," the RBI advisory to banks said.
Also, under such
schemes, the interest / EMI on the home loan availed of by the individual
borrower is serviced by the builder during the construction period. These loan
products, the RBI said, are popularly known by names such as 80:20 & 75:25 schemes.
RBI said such housing
loan products are likely to expose banks and their borrowers to additional
risks.
"RBI should have
consulted stakeholders before issuing such circulars on disbanding current
practices. In the past, the RBI circulars have resulted in reversal of good
market sentiments affecting economy and concerning housing sector " Mr.
Lalit Kumar Jain added.
The RBI's move to
scrap the 80 : 20 scheme will not have a huge impact on real estate major DLF
Ltd , says CFO Mr. Ashok Tyagi. The central bank RBI has barred banks from
providing upfront home loans for under-construction projects through innovative
schemes termed as "80:20" or / "75:25" by the developers/
promoters.
Mr. Tyagi says the
scheme was very helpful for young professionals who were able to buy into a
home and not pay the interest for 3 years, while they were paying the rent on
their rented premises.
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