One-time restructuring should be allowed for some loans: HDFC chairman

HDFC Chairman Deepak Parekh
Housing Development Finance Corporation’s (HDFC) Chairman, Deepak Parekh, has urged regulators to allow one-time restructuring of certain real estate projects — particularly for stuck projects where building approvals have been delayed. Speaking at the Second India Mortgage Leadership Conclave on Wednesday, Parekh said: “If these restructured accounts are considered as standard assets for a period of, say, 12 months, lenders will stop being so diffident. This is not a new suggestion. An exceptional regulatory treatment was permitted by the RBI in 2008, which helped revive sentiment.”

Pointing to the fact that the Indian realty market was facing pressing issues and timeliness of action was key to prevent further haemorrhage, he added that one could not sugar coat the fact that there was pain, and the trust deficit was clogging the flow of liquidity to where it was most needed. 

“There are developers who genuinely need last-mile funding. Many are being denied their rightful funding in an environment that has become wary of lending to the sector,” he added.

Parekh said builders had erred in the past by over-leveraging and going on a land-buying spree. In addition, they misjudged market demand built homes that customers could not afford. Further, they could not find timely solutions for excessive unsold inventory. However, he emphasised that it would be unfair to pin all the blame on developers. 

“However, my stance is that real estate loans are different. The value of land is always there,” he said. Delay in granting building approvals is not always in the hands of the developer, and we still don’t have a single-window mechanism for such approvals. 

He highlighted a few key trends that had emerged of late, which would boost the sector. For example, the Ministry of Housing and Urban Affairs’ Draft Model Tenancy Act, 2019, had balanced interests of both the tenants and landowners. 

A formalised rental market will reduce skewness and lead to higher occupation of vacant homes. 

The irony is that on one hand, India is facing huge shortage of housing, but on the other, over 11 million homes are lying vacant in urban India alone.

Another interesting trend to have emerged is in student housing. “It is estimated that at present, only one in five students enrolled in higher education is fortunate to get accommodation in an institutional setup, leaving most to seek alternatives such as rental accommodation. Student housing needs high-speed connectivity, entertainment facilities, and smart devices, besides other basic living facilities. Real estate investors have found that student housing can offer good returns on investments,” said Parekh.

He added that India was catching up with the western trend of co-living spaces, designed to suit the needs of young, single working individuals who don’t want the hassle of house maintenance. Demand for serviced apartments, too, is gaining ground, Parekh said.

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