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Banks want NPA norms to be relaxed for housing project loans

CREDAI representatives have informed the ministry that many projects could not be completed due to lack of funds

Manojit Saha  |  Mumbai 

Following the ministry asking banks to boost up lending to the residential housing projects, the lenders now want the central to relax norms pertaining to asset classification to facilitate credit flow.

In a meeting held last week with bankers and real estate developers body Confederation of Real Estate Developer's Associations of India (CREDAI), DK Mittal, secretary, financial services had reviewed the issues pertaining to credit flow to the housing sector and discussed measures to boost the loan flow.

representatives have informed the ministry that many projects could not be completed due to lack of funds. Most of these unfinished projects are in tier-II and tier-III cities.“We have noted that a developer starts the project by availing from non-banking sources, mainly non-banking housing companies, at a high interest. But later they have realized that it servicing such loans become unviable,” said a top executive from a public sector

To add to the woes of real estate developers, Reserve of India guidelines does not allow banks to take out that exposure from the NBFC if the project has not been commenced.

Now, bankers have requested the ministry to take up the matter with the banking regulator so that favourable polices could be framed to boost bank loans to real estate projects.

In addition, banks also want asset classification norms to be relaxed on real estate projects.

According to RBI norms, if a project fails to be operational after two years from commercial operation date (as scheduled while loan sanctioning), banks have to classify the project as non-perfoming.

“We have noticed that there are issues which are beyond the control of the developer like land acquisition and other clearances. These are genuine issues and the developer cannot do much in such a case. As a result, the commercial operation date of the project is delayed,” said another banker who attended the meeting.

Banks have requested the finance ministry to take up the matter with the central bank so that some relaxation in terms of extending the asset classification norms over 2 years.

The finance ministry has also asked to conduct a survey of unsold housing stock so that a decision could be taken on unlocking their value.

First Published: Sun, September 23 2012. 18:17 IST