Borrowing will be costlier, banks more cautious: JLL

In the wake of housing finance racket coming to light borrowing could become dearer and banks would turn extra cautious while lending to real estate developers, said property consultant Jones Lang LaSalle (JLL).

"There will be repercussions in terms of increased caution by banks while lending to developers. Borrowing will become more expensive and the process involved in getting it lengthier as banks increase their vigilance levels," JLL India Chairman and Country Head Anuj Puri said.

Reacting to the housing finance racket, Puri said developers might now have to depend more on private equity to fund projects.

"...We may see a marginal increase in the dependence on private equity. That said, the Indian banking system’s robustness has never made it very easy to obtain debt before, either," he said in a statement.

The CBI had yesterday arrested LIC Housing Finance CEO Ramachandran Nair and seven other top bankers for allegedly colluding with Mumbai-based Money Matters in sanctioning corporate loans.

Puri termed the racket as a "one-off instance" although "unfortunate".

"The housing scam that is currently a hot topic on the newswire is a one-off instance – and while it is unfortunate, it is minuscule when compared to the overall size of the banking system," Puri said, adding that it certainly does not reflect on the real estate sector as a whole.

"This unfortunate event cannot be attributed to a breakdown of a maturing system. The need for governance will increase, but that is not something we did not know already - and it may take such incidents to hasten its faster emergence," he said.