Government asks banks to focus on partially completed real estate projects' funding

MUMBAI: In a bid to improve housing stock in the country, Union secretary for financial services DK Mittal has asked commercial banks to focus on financing partially completed projects on a priority basis, developers' apex body CREDAI said in a release.

At the joint meeting between developers body CREDAI and Indian Bankers Association, bankers insisted on the one-project one-bank account norm and opening escrow accounts to track the usage of project-specific funds. Bankers also suggested incentivizing the rate projects through lower interest rates.

Presiding over the joint meeting, Mittal asked the developers' body to conduct a survey of unsold housing units in various cities and submit the same in order to enable a decision on unlocking of their value. CREDAI will be submitting first batch of this data on metro cities in the next 10 days.

"They (banks and government) are very keen to reduce property prices and asked for our commitment on this," said CREDAI national president Lalitkumar Jain.

According to him, bankers and government has perception that developers are not selling despite lot of unsold inventory and in Monday's meeting the builders have tried to highlight their stance.

"None of the cities have major stock of ready flats that can be occupied right away. At the most it can be 2.5% of the total proposed projects. CREDAI will hire a third party agency to conduct the survey on this," Jain said.

In August, Finance Minister P Chidambaram had asked bankers to put pressure on developers to lower property prices to get the economy moving. Since then the Union Secretary for financial services has met developers and bankers thrice to understand the issues of housing sector and developers' financing problems.

Bankers are also of view that approval process across the country needs to be addressed and all the states need to be sensitized on effects of delay in project approvals, Jain said.

At the meeting, CREDAI also reiterated its stance that limitation on land availability for realty projects and restrictions on floor space index also need to be addressed to increase housing supply and price rationalization.