Though the Reserve Bank of India has laid out strict due diligence standards for banks for sanctioning loans to the real estate sector, industry experts believe lending to the sector will not decline.
“Banks will continue to fund real estate projects. The RBI is concerned about transparency in the system. If good projects come up, banks will fund them. Availability of funds will not be a major cause of concern for the sector,” consultancy firm Jones Lang LaSalle’s Chief Executive Officer (Business), Sanjay Dutt, said during an event organised by Girem Corporate Capital in Mumbai.
However, what would really impact the sector is time-consuming process of obtaining approvals of various regulators, and the inflation, which is leading to increase in input costs for the developers, he said.
“The real estate sector will continue to grow. But if the government speeds up its clearance procedures, the supply of housing stock will increase, bringing down property prices. The government and regulatory authorities need to realise that allowing quick permissions will act in favour of consumers.”
Boman Irani, Chairman & Managing Director, Rustomjee doesn’t agree that developers alone are responsible for the delay in projects. He quips that while there is all pressure on the developers for timely delivery, the approval authorities have no accountability of delays at their end. Slow-moving government approvals in Mumbai and across various other regions in India over the last nine months have created a drag on completion timelines and also project launches.
The approval process involves connecting with more than 150 people in about 40 departments of central and state governments and municipal corporations and since some time now, files haven’t been moving in most of them. Then there is the prickly issue of more than 50 approvals before a project can even get off the ground.
Boman Irani also does not agree that funding mechanism is an issue. “Capital is not really an issue. For most of the reputed developers who have a track record of delivery, capital is genuinely not an issue. Bankers will lend to you, private equity is still very active in the market. Just as in our case, we’ve got sanctions from reputed banks and NBFC’s for more than Rs. 500 crores, in the last one month at extremely competitive rates. And I am sure you are hearing about many PE and other deals happening around in the market too. At a recent conference which was attended by various financial institutions, all funding institutions present expressed their willingness to fund real estate projects and developers of repute,” he says.
