The affordable housing segment, which is the new rage in the real estate sector after it got infrastructure status last year, still suffers from lack of funds from banks. Market participants feel they still have to wait a few more months before banks embrace such projects.
Infrastructure status for the segment was announced by Finance Minister Arun Jaitley in his Budget speech for 2017-18 on February 1, 2017, which allowed builders to borrow from banks at cheaper rates compared to the conventional lenders such as private equities.
“That (infrastructure status) means they (developers) should have been able to access a lot of funds at cheaper rates… but that’s not happening. And that’s not happening anywhere,” said Jayashree Kurup, Head of Content and Advisory, at the property consultant website magicbricks.com .
She added: “It has not translated into anything on the ground, except may be a boost in sentiment.”
Most market participants blame it on the credibility crisis brought about in the past few years by the slump and lack of sales and delivery of apartments to end-users.
“Construction finance has not been doing well — essentially because of the fact that the sales have not been good,” Shrikant Srivastava, Chief Risk Officer, India Mortgage Guarantee Corporation, told IANS.
Srivastava, who has also served as the Chief Risk Officer at PNB Housing Finance, further said: “All lenders have burnt their fingers in doing construction finance because projects did not get completed, sales did not happen, and therefore the loans they had taken, they could not pay back.”
In the affordable housing space, bankers want to do projects, but as lenders have suffered losses in the prime segment, bankers were shying away from giving construction finance for the segment, he added.