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