Lack of skills delays uniform property valuation norms

KOLKATA: Home loan lenders agree to adopt a uniform property valuation norms to prevent fraud and a rise in bad loans, but the lack of well-trained property valuers has thrown a spanner in the works.

National Housing Bank says the introduction of a standard policy and procedures can be delayed till next year despite the fact that it and Indian Banks' Association have jointly adopted the policy handbook in February last year based on best international practices.

""Developing a cadre of professional valuers will be the biggest challenge,"" NHB chairman and managing director RV Verma told ET. ""It has to be a gradual process.""

Verma has recently told housing finance heads to adopt the handbook on their respective boards and move towards a streamlined regime.

The uniform valuation norm will add teeth to SARFAESI Act, which has strengthened banks NPA recovery system. Securities & Exchange Board of India has made valuation a must for real estate mutual funds.

""We welcome the standardised system which will prevent the practice of excess valuation,"" said DHFL Vysya Housing Finance managing director R Nambirajan.

Excess valuation of property is widespread in India among home loans borrowers for the purpose of increasing the loan size and reduce margin money. Such deviations sometimes lead to default in loans. Fraudsters often use the loophole in the system to their favour.

Although the policy on uniform valuation rules was accepted last year, the financial system is yet to come to grip with it. ""The regulators need to make lenders as well as valuers aware of the uniform valuation method,"" Suvasis Paul, a Kolkata-based valuer said.

The country does not have any law to regulate the valuation profession and make valuers legally binding. Valuation is an essential exercise in case of mortgage financing. About 80% valuation is done in India for baking and housing finance sector.

""Lenders have agreed to adopt the standardised norms but the current set of valuers may not equipped to handle it,"" Verma said. Banks and housing finance companies seek the services of immovable property valuers and they invite them on their panel in order to get valuations done. Lenders rely extensively on their opinion and report for lending decisions as effective management of credit risk is important under Basel 2 regime.