Banks must be allowed to lend for land to developers: Parekh at BS IMLC

At the BS IML Conclave, Deepak Parekh said that some incentives must be provided to the developers to make affordable homes

The banks must be allowed to lend to developers for acquiring land, chairman of HDFC AMC and HDFC Life Deepak Parekh said on Wednesday. He said that it is also necessary to encourage new affordable housing projects. 

In a fireside chat with Tamal Bandyopadhyay, consulting editor of Business Standard, at the third edition of the India Mortgage Leadership (IML) Conclave in Mumbai, Parekh said, that currently, developers have to resort to short-term borrowings from NBFCs and foreign firms which charge high-interest rates of 17-18 per cent.

"As soon as they get the land and start construction, they get normal construction loans from banks and repay the NBFCs...If you want the real estate prices to come down and become more affordable, why can't banks lend money for land? I just cannot understand that," he said.

"It is a safe security, provided you do your title search, provided you ask the developer to put the 30-50 per cent of the land."

On affordable housing, Parekh also said that the segment had received lesser importance as compared to the costlier homes after the withdrawal of the CLSS scheme. "We told the finance ministry to continue the CLSS scheme but it could not due to budgetary constraints," he added.

Parekh said that some incentives must be provided to the developers to make affordable homes.

"Today, I see very few developers making affordable, small homes because the demand for luxury homes is so high," he said, adding that most flats sold in Mumbai are above Rs 1 crore. "Those can not be called affordable homes".

"We have to come up with something which incentivises the developers to take on the projects to make 400-500 sq. ft. homes. Otherwise, we are leaving 'mass janta' behind," he said.

Parekh sounded optimistic about the overall residential market in India.

"I have never seen the housing market as buoyant as I see today," he said.

"The housing market is booming and this is 30 per cent higher than last year."