Articles

Nabil Patel’s Revelations on the Impact of NHB Directive on the Real Estate Market

by Jatin Sharma Writer

Liquidity squeeze had already hit the real estate sector hard when the banking financial companies such as DHFL IL&FS defaulted on loan payments. What has come as another blow are the recent directives by NHB. Housing Finance Companies(HFCs) have been refrained from lending by NHB under its subvention schemes.  This would affect the sales in the housing sector that had just begun to progress. The recovery that the sector had witnessed over the past one year would be affected by about 20% by the directives. Further stressing on the need to understand how this scheme works and how it will affect the sector are prominent real estate developers like Nabil Patel.

How  Does the subvention scheme work?

 

·        A down payment of 5-20% is made by the buyer to the builders

·        A loan is sanctioned in favor of buyers for the remaining amount

·        EMIs are paid within the agreed time period by the builders

·        Buyers do not have to pay the EMIs until possession

·        Funds are available at lower rates to the builders for the project completion

·        Flats are possessed by the buyers who start paying EMIs at this stage

 

Misuse of funds is the first issue that the scheme is believed to be associated with. This is in regards to the upfront disbursal of loan to developers by HFCs and banks that increased the scope for misuse of funds. There have been several complaints of misuse of profiles of buyers by developers in order to avail the loan. The fraud is also in the form of untimely delivery of the house as defined in subvention and non-servicing of interest by the developers. Misuse of funds has also been reported under certain cases. Then there are cases where funds collected for one project were used in some other project.

 

Inappropriate Timings

 

Experts believe that the NHB directive should have been introduced at least 5 years ago when such schemes were actually benefitting the investors. With the prices not going up in the current scenario, investors too are mostly out of the market. The current market only favors the buyers which is why NHB directives will only impact the recovery of the sector. The situation which is already coping with the liquidity squeeze will only get worse with this. The move, therefore, is bad for developers at this time as it is expected to further inhibit sales and close the avenues for accessing low-cost funds.

 

According to Nabil Patel DB realty, the implementation of this directive is absolutely not conducive to the environment the real estate market is facing today, both in terms of developers and home buyers.

 

 

 


About Jatin Sharma Innovator   Writer

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Joined APSense since, August 9th, 2018, From New Delhi, India.

Created on Aug 26th 2019 05:12. Viewed 109 times.

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