At least four firms, Ansal Properties and Infrastructure Ltd (Ansal API), Emaar MGF Land Ltd, Kumar Urban Development Ltd and Paranjape Schemes Constructions Ltd, have received fresh sanctions from banks, although overall lending to the sector remains subdued.
Ansal API recently received commitments from State Bank of India for Rs.1,000 crore, according to a company official who requested anonymity. State Bank officials declined to talk on this. The company plans to deploy the money in its township project in NCR, an Ansal official said.
Kumar Urban has received Rs.100 crore and Paranjape Schemes received Rs.150 crore, said officials of these firms. The officials, requesting anonymity, declined to divulge the terms of fresh loans.
Amit Goenka, national director of capital transactions at realty consultancy Knight Frank India, said cash-strapped developers may find it difficult to get bank loans. “There are new banking norms that check how much equity is there to make sure that the loans are absolutely construction-linked,” Goenka said. “There are no ad-hoc loan disbursals.” Bank lending is the single largest source of funding for developers, who require funds primarily for construction finance but also to service debt.
Traditionally, the Reserve Bank of India (RBI) has taken a cautious approach towards banks’ exposure to the segment, classifying it as sensitive sector along with capital market and commodities in view of the higher risk involved due to price fluctuations.
Loan flow to realtors took a hit following the corporate loan scam in November when central bureau of investigation (CBI) arrested eight senior officials from banks and financial institutions for violating prudential norms or leaking vital information. Besides, the recent controversy over the allocation of second generation airwaves, which involved a few real estate firms, also made banks more risk-averse.
“We would not any more entertain intermediaries. They will have to come directly,” a senior executive of a leading state-run bank said. He did not want to be named as he is not authorized to talk to the media. Indian banks lending to real estate sector grew by 10.4% in the fiscal year ended March 2010 to Rs.5.8 trillion, contributing nearly 17% of their loan book, according to RBI data.
Latest RBI numbers showed growth in banks’ exposure to commercial real estate in first 10 months of fiscal 2011 was 14.9%, against a 4.4 % decline a year ago. Officials of the real estate industry said the number of new projects have virtually halved in the last three months due to lack of availability of bank funding and adverse demand scenario.
