Capital won’t be issue for big realtors

Fund-starved realtors may heave a sigh of relief. Banks are now considering loans to this sector on case-to-case basis, especially for those facing genuine liquidity problems.
The move follows Prime Minister Manmohan Singh’s assurance to the industry that liquidity should not be a problem for companies having good fundamentals. Leading bankers have started asking developers to present a detailed account of their business challenges. Banks are also considering providing loans for purchase of land which was a strict no-no so far. Public sector banks are taking the lead in reviving the hopes of realtors.
Experts say RBI’s recent moves will also provide sufficient cushion to banks to lend to real estate companies. RBI slashed CRR by 350 basis points in the last few weeks, which will infuse about Rs 140,000 crore in the system. The central bank will also inject liquidity through its repo tenders at 7.5% instead of 8%. RBI has also lowered SLR to 24% from November 8 against the current norm of 25% of the banks’ deposits. Real estate developers’ association, Naredco, has had series of meetings with the leading banks, highlighting the effects of credit crunch on the sector and their shrinking revenue streams.
When contacted, Assotech MD Sanjeev Srivastava, who is a member of Naredco, said: “It has been brought to banks’ notice that 90% of the real estate market comprises unlisted firms. Hence the market situation is not the benchmark to draw conclusions about paying capabilities of unlisted companies. Top bankers have given us positive signals that things would soon improve.”
DLF executive director (finance) Saurav Chawla said things have started improving for the real estate sector. “In October, banks had temporarily shut loan disbursals but now interest rates have gone down and lending will regain momentum. As far as DLF is concerned, in the hardest of the times, we could sell our properties. We expect to do even better if liquidity improves,” he said.
Industry players pointed out that banks are waiting for a bit of correction to happen in the real estate sector. “With a slump in the Indian real estate sector due to excessive credit crunch and demand slowdown, home buyers can expect a further correction in real estate prices in the range of 20% in the short term. This would improve paying capacity of the loan borrowers and reduce their overall exposure,” a Delhi-based developer said.

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