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RERA & India’s Home Loan Market

Sep 18, 2017 02:03 PM

The Real Estate (Regulation and Development) Act, 2016 brought with it a lot of anxiety and uncertainty among both home buyers and developers while it was getting implemented. Buyers were highly skeptical about where to put their hard-earned moneys in. Developers too were not signing any agreement with buyers before registering their projects under RERA as the act prohibits per-launch sales. The first quarter of the current financial year saw a marked decrease in home loan sales due to RERA implementation.

Sudin Choksey, managing director of Gruh Finance Ltd., recently told Bloomberg that his company did not experience any slowdown as far as internal growth was concerned. The company experienced 23 percent growth in the first quarter and this growth, he believes, will continue for two more months of the second quarter. However, he did say that the higher end of the market could slow down as the rate of product launches has come down significantly. Previously, a number of developers used to do pre-launches. This can’t happen anymore.

There is also movement of loans among lenders. A number of reports suggest that the growth in the first quarter was mainly driven by a transfer of home loans from public sector banks to private sector non-banking financial companies (NBFCs). However, Mr. Choksey believes the reverse is true, and that there will be more movement to public sector banks from housing finance companies. The value of transactions has also come down a bit though volume numbers have definitely improved.

There has been an increasing number of loan applications compared to value growth. In general, value reportedly shows five to seven percent growth. Growth may have slowed down this year because of the focus brought in by government policies, but housing will grow in all probability. The growth will be felt next year onwards. The economy needs to be kick-started and pushed to a higher and better level. Mr. Choksey predicts a 20-25 percent loan growth for the financial year 2017-18.

Meanwhile, MG Vaijinath, chief general manager, real estate & housing business of State Bank of India, believes that the process of home loan disbursals will settle down in the coming months as RERA has already been implemented in 25+ states. He is optimistic that growth will pick up during the festive season. Mr. Vaijinath predicts that the home loan market will grow 16-18 percent in coming years.

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