Sunday, June 7, 2009

Banks begin lending to realty sector

For bankers who were reluctant to lend to the housing sector, there has been a change in mood. Now, there is a sense of willingness to lend, though that is largely restricted to the affordable housing segment. This is priced at approximately Rs 4 lakh all the way to Rs 30 lakh.

“We have seen an interest reappearing in the real estate sector in the past few months. A growing number of our customers have been availing loan for affordable housing projects,” said Axis Bank senior vice-president retail banking Sujan Sinha. Another official at a public sector bank said with the revival in the market, banks are in the lending mode, with a lot of potential existing in the affordable housing segment. It is gathered that builders have now started terming their projects as affordable housing by cutting down on certain luxuries that were initially planned.

Niranjan Hiranandani, MD, Hiranandani Group, admits that a host of developers have converted their projects to affordable housing from what was luxurious. “Though, there is a greater demand for affordable housing projects that could change by the end of the year,” he said.

The definition of affordable housing depends on the builder and the location. Tata Housing set the ball rolling a few weeks ago by launching its project in Boisar, which is a two-and-a-half hour train ride from Mumbai. Company officials concede that margins are on the lower side at 20-25% compared to 40% for more expensive housing.

“Loans are available for builders at 13% compared to 15% a while ago. Bankers have been favouring affordable housing projects, since that is where demand could see the largest rise,” said Shobhit Agarwal, joint managing director, Capital Markets, Jones Lang LaSalle Meghraj (JLLM). Builders, for their part, have reduced the size of their apartments, apart from cutting back on frills like a gymnasium.

According to Kapil Wadhawan, vice-chairman, Dewan Housing Finance, there are projects that are coming up even in the tier I cities that can be classified as affordable. “An average loan size for our company is Rs 6 lakh and we expect to find more customers in large cities, such as New Delhi and Mumbai, which was not the case earlier,” he said.

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