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Experts ask real estate to realise social responsi





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Experts ask real estate to realise social responsibility

Fri, 24 Apr 2009 07:18:00 +0000

Ahmedabad In a brainstorming session on ‘Opportunities and Challenges in Finance and Banking for Real Estate Sector’ on Wednesday, banking experts told real estate developers to realise their social responsibility of providing affordable housing to the masses.


Held under the aegis of the Gujarat Chamber of Commerce and Industry (GCCI) and Gujarat Institute of Housing and Estate Developers (GIHED) at Hotel Grand Bhagwati, stress was also laid on providing cost-effective housing for the low income groups, as this had remained largely unexplored.

According to GIHED vice-president Suresh Patel, a developer, this was because in the boom period of the last four years, majority of big players had worked towards meeting the needs of only top 12 per cent of the market. He felt affordable housing at lowest rate was possible.

He wondered how ‘board room analysis’ by bankers born in the 1980s could decide the fate of a 50-year-old sector. The good repayment figures shown by these bankers to prove their banking prowess could not be taken at face value because of limited exposure, he said.

Vijay Shah, a prominent real estate developer, lamented that banks were reluctant in extending project loans to developers. He said developers also felt difficulty in sourcing down payment of loans lately. Shah pointed out that banks had reduced valuation of assets for credit from 80 per cent to 60 per cent.

S Srinivasan, chief executive officer of Kotak Real Estate Fund, was optimistic about the real estate scene of Ahmedabad. He said it was much better than other cities like Mumbai and Bangalore. He said nowhere else was any developer able to offer a price of Rs 1,500 per square feet, but in Ahmedabad. He said if a buyer called a price of Rs 2,000 as unaffordable, it was a matter of mindset.

According to him, developers had capital in the past and yet had the luxury of saying no to new investment in the last one year. That was time of excessive commitments and it would take time to correct that situation in the real estate sector. Srinivasan wondered over the abysmally small number of developers who could declare business size in excess of Rs 150 crore.

“Most developers have not built their balance sheets over the years, though they borrowed a huge amount of Rs 72,000 crore from banks… this calls for hard thinking. For, you have no choice but to prepare your balance sheet if you want to build your business in the long run and if you do not want to confine yourself to relationship banking,” he said.

Srinivasan said the Reserve Bank of India was often cursed for enforcing restrictions on banks’ lending parameters, but it should be remembered that this cautious approach was in the developers’ interest. He felt that banks must first be able to build confidence in the lending activity to build up stable banking operations.

He also advised developers to work closely with the planning authorities, especially when planning shopping complex after complex in a close range. “There is a disaster waiting to happen in terms of viability and lessons must be drawn from what happened in places like Gurgaon,” he said. HDFC general manager Irfan Kureishi also spoke on the occasion.