The practice of Housing Project Developers using loans meant for one project to kick-start other projects came into sharp focus at a meeting of Bankers convened by the Finance Ministry in Mumbai. This tendency of Builders to launch other projects when the earlier ones were not complete has caught the eye of Bankers.
On the issue of there being no thaw in property prices despite slowdown in sales, Bankers say, those who invested in housing projects or Bank-rolled them at the pre-launch and launch stages were preventing Builders from bringing down prices.
The meeting, which was presided over by D.K. Mittal, Secretary (Department of Financial Services), Ministry of Finance, comes in the backdrop of reports about the existence of large number of unsold flats with Developers/Builders in Cities like, Mumbai. The issue of unsold flats with Developers/Builders was flagged at a review meeting of Public Sector Banks last month in New Delhi.
On the issue of there being no thaw in property prices despite slowdown in sales, Bankers say, those who invested in housing projects or Bank-rolled them at the pre-launch and launch stages were preventing Builders from bringing down prices.
The meeting, which was presided over by D.K. Mittal, Secretary (Department of Financial Services), Ministry of Finance, comes in the backdrop of reports about the existence of large number of unsold flats with Developers/Builders in Cities like, Mumbai. The issue of unsold flats with Developers/Builders was flagged at a review meeting of Public Sector Banks last month in New Delhi.
Sufficient demand:
In meeting at Delhi, Finance Minister P. Chidambaram observed that when there is sufficient demand for dwellings in the cities, the presence of unsold flats amounted to blocking of capital.
Chidambaram says, unsold flats should be a matter of concern for Bankers, who have funded the Builders and Developers, on the one hand, and property Buyers, on the other. The refusal of Builders/Developers to reduce prices was cited as the main reason for flats remaining unsold.
If they bring down prices by 15-20 per cent, it should be possible to find ready buyers. The sale of such flats could provide a much–needed demand to push the economy.
At the Finance Minister’s behest, the Indian Banks’ Association has formed a Committee under the leadership of Ajai Kumar, Chairman and Managing Director, Corporation Bank, to look into the issue of unsold flats with Builders holistically. The Committee will also examine ways to put pressure on Builders to bring down prices and popularise housing loan schemes through incentives.
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