Need For Rationalizing Lending Rates for Homebuyers and Builders

Vinod Behl

The Associated Chamber of Commerce (Assocham) organised a national real estate conference in New Delhi on July 10, 2024, on the theme of , ‘ Changing Dynamics of Real Estate For Viksit Bharat – Opportunities & Challenges’. The conference partnered by Torbit Group was spread over four knowledge sessions- ‘Transforming real estate with public-private partnership -policies , reforms and future direction’, Financing real estate projects, Real estate development with safety, security and sustainability’ and ‘Use of new technologies in construction in real estate sector’.

Speaking at the conference, the chief guest, Sanjeev Kumar Arora, Member, Haryana RERA stated that RERA which safeguards the interests of   homebuyers and builders, has helped in the organised growth of this sector. He said that the success of RERA can be gauged from the fact that 1.25 lakh housing projects have been registered under it and complaints of aggrieved homebuyers have reduced significantly.   He further told that RERA has given a boost to FDI in real estate and public-private partnership has been introduced for long-term growth of the sector. He called upon developers to maintain financial discipline to avoid project defaults and stressed upon the need for rationalising lending rates to encourage investors.

In his welcome address, Pradeep Aggarwal, Chairman, National Council on Real Estate, Housing and Urban Development, Assocham & Chairman, Signature Global (India) Ltd stated that real estate market currently pegged at Rs 24 lakh crore is contributing 13.8 percent to India’s GDP which is likely to go up to 20 percent in the coming years. He added that after the sector has been regulated, more than 86 percent of homes have been delivered on time or before time, elevating the confidence of buyers and investors. He further said that although a pre-budget announcement has been made to build 3 crore rural houses, few more policy incentives, particularly for boosting housing for the middle class are expected in the budget.

Talking about the changing dynamics of real estate, Vineet Relia, Director, Urbanbriq Development Management Pvt Ltd said that there was a time when the real estate sector used to thrive on a need basis but now the trend has shifted to upgradation and lifestyle choices. Expressing the view that today customer is service driven, he called upon the developers to embed service provider DNA to satisfy customers especially as it is a huge challenge to sell so much inventory at high prices. He also expressed the need for promoting affordability by the government.

Gaurav Jain, CEO of India Projects at Infracorp (Bahrain) expressed his concern about the rising prices and the challenge to remain affordable. He suggested to increase FAR and improve infrastructure to promote affordability. Talking about shoddy delivery parameters, he expressed the need to cover service providers under RERA and make them accountable for project defaults.

RV Verma, Former CMD, National Housing Bank (NHB) and Ex-Chairman AU Small Bank talked about the criticality of investment for both demand and supply side, especially in view of very complex dynamics of housing sector involving multiple stakeholders at the central and state level. He mentioned about surmounting the challenge of unrestricted flow of long-term funds. He also dwelled on the need for land policies to create right environment for maximising housing.

Ms. Dakshita Das, Former MD & CEO NHB talked about the challenge of providing adequate affordable housing in the context of housing finance. She said that real estate developers have to knock at the doors of banks as most of the housing finance companies supervised by the NHB offer individual loans to homebuyers and very few are looking at substantial developer loans. Stating that NHB is currently not running any scheme for project financing for private developers, she emphasised on the need for rolling out such a scheme to provide support to developers.

Sanjeev Kathuria, Founder & CEO, Torbit Consulting pointed out about unstructured real estate financing, depriving developers from availing bank loan for land. As a result of that, they have to source funding for land from private equity firms at a high interest rate of 20 percent or more. The high interest rates for land and construction together with long delays in getting project approvals make projects financially unviable. He stressed on the need for providing construction funding at lower cost and bringing down approval time for projects to make projects financially feasible.

Talking about tackling the problem of stalled housing projects, Ms. Sonal Mehta, Senior VP-Strategy & Alliance, Resurgent India, dwelled on the need for bringing about innovative financing policies for developers besides launching new funds on the lines of ‘SWAMIH Fund’.

During the conference, a joint knowledge report by Assocham and Resurgent India was released on the theme of ‘ Changing Dynamics of Real Estate, Opportunities & Challenges’.

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