Mumbai: The State Bank of India (SBI) is bullish about lending to residential housing developers as it expects the new real estate law to spark growth in the sector, a senior bank official said.
Following the implementation of the Real Estate (Regulation and Development) Act, 2016, (RERA), there is more regulatory control and a stable view on cash flows, said SBI chief general manager Vaijinath M.G., who heads the bank’s real estate and housing business unit.
“More and more balance sheets of real estate developers (residential properties) are expected to become fundable in the days to come. For SBI, that is an opportunity area for credit growth and we are well set within the bank to take up this business,” Vaijinath said.
The real estate and housing business unit comes under SBI’s home loan vertical, given the synergies in this business, he said. At the end of September, SBI had an outstanding home loan portfolio of Rs2.9 trillion, the largest in India.
Apart from developing new loan products and opening a help desk for builders, SBI has also signed a memorandum of understanding with the Confederation of Real Estate Developers Associations Of India (CREDAI), and a Maharashtra government-owned body for funding projects by the state slum rehabilitation authority, he said.
“Earlier, even if we wanted to lend, a lot of builders were ineligible because there was lack of transparency on the usage of funds, approvals and compliances and completion time,” he said.
With greater predictability in project completion, SBI is keen on financing affordable housing projects, which are in high demand. He added that unlike earlier when developers would build keeping investment potential of houses in mind, most home buyers now are end-users. Accordingly, builders are re-orienting themselves towards this category.
The exuberance of acquiring land and moving money across projects is a thing of past, said Pankaj Kapoor, managing director, Liases Foras. “With RERA, they have to maintain an escrow account and use the funds for construction purpose only. Additionally, the current market is of buyers who are also end users. Both these factors are comforting as far as lending is concerned. Post-RERA, market has stabilized to a large extent, and this has created a level-playing field for banks to lend,” Kapoor said.
According to SBI’s Vaijinath, the fact that borrowers are end users of houses is positive for the bank’s asset quality. “Home loan delinquencies are already very low because there is greater willingness to repay as the borrowers fear that the default may result in them losing the house. Nearly 90% of our home loan borrowers are first-time buyers,” he said.livemint