Full page Ads by builders = no negative coverage. For all the lamenting about dirty politics, who's blowing the whistle on the rot in media?
— Milind Deora (@milinddeora) September 18, 2013
Category: Realty
Hat Tip Nooresh Merani
[gview file=”https://alphaideas.in/wp-content/uploads/2013/09/valuenomics-real-estate-2013.pdf”]
Nowadays newspapers are full of real estate ads which offer 80-20.In such schemes, the EMI on the housing loan availed of by the individual borrower is serviced by the builder during the construction period.
Well, guess what the RBI has just banned this practice.
The Reserve Bank today asked banks to link the disbursal of home loans to stages of construction to protect the interests of buyers and contain the fallout of “innovative” housing financing schemes.
“In view of the higher risks associated with such lump-sum disbursal of sanctioned housing loans and customer suitability issues, banks are advised that disbursal of housing loans sanctioned to individuals should be closely linked to the stages of construction of the housing project/houses…,” an RBI notification said.
Upfront disbursal “should not be made in cases of incomplete/under-construction/green field housing projects,” it said.
The notification follows the introduction by some banks of “innovative housing loan schemes” in association with developers/builders, where upfront disbursal of housing loans is made to builders without being linked to the various stages of construction.
Also, under such schemes, the interest/EMI on the housing loan availed of by the individual borrower is serviced by the builder during the construction period. These loan products, the RBI said, are popularly known by names such as 80:20 and 75:25 schemes.
The RBI said such home loan products are likely to expose banks and their borrowers to additional risks.
The risks include disputes between borrowers and builders; default and delayed payment of interest/EMI by the builder on behalf of the borrower, and non-completion of the project on time.
“Further, any delayed payments by developers/builders on behalf of individual borrowers to banks may lead to lower credit rating/scoring of such borrowers by credit information companies…,” according to the RBI notification.
The central bank said that in cases where bank loans are disbursed upfront on behalf of individual borrowers in a lump-sum to developers without any linkage to construction stages, banks run disproportionately higher exposures with concomitant risks of fund diversion.
As I had blogged earlier, the real estate bubble in India has peaked and is now deflating.
Categories
Indian Real Estate is headed for a bust
You have the Indian economy in a tail-spin,equities are hammered out of shape,the job market is the worst in years,the Rupee is plunging to new lows and yet real estate is doing well…thank you very much.
The report below by 99 acres makes for fascinating reading.Most realty destinations have provided eye popping returns in the last one year.Most real estate agents are in bad shape and yet prices show no signs of abating.
[gview file=”https://alphaideas.in/wp-content/uploads/2013/08/MumbaiReport_99acres_180813.pdf”]
So what’s next?
All signs (falling transaction volume,low credit offtake,low rental yields etc) point to a bust in the real estate market.The catalyst?Elections.
Categories
Boss,I am a Crorepati
This post is in continuation of my This is India ! series (see here)
Here is a real life exchange
Friend:How much is the fare?
Auto Rickshaw Driver:50 Rs
Friend:What !This is hardly any distance.Take 20 Rs
Auto Rickshaw Driver:No
Friend:Ok-take 30 Rs
Auto Rickshaw Driver:Boss, I am a Crorepati.Have sold my land and got Crores from the Govt.I am driving this auto for timepass.If you want, I will drop you for free !
Apparently,lots of auto drivers in Navi Mumbai were local villagers who got Crores in compensation when their land was acquired.