Housing finance companies should focus on providing retail loans instead of financing developers: SBI’s Rajnish Kumar

State Bank of India chairman Rajnish Kumar has said that Housing Finance Companies (HFCs) should focus more on providing retail loans instead of financing developers.

Rajnish Kumar told Money Control, "If you are a housing finance company, be a housing finance company. Else be a developer finance company. Everybody drew comfort when the money was lent to HFCs. But that turned otherwise and that’s where the whole problem arose. Earlier, HFC was giving 75 percent of their total loans to retail loans. But rules changed and it reduced to 50 percent of the total loans."

He added that there was space for new HFCs to enter the market, but on two conditions. "They should be 100 percent housing finance companies and they should not take deposits," he said.

Kumar also said that he would prefer the old rule of 75% (of an HFC’s book being mortgages) be brought back. Kumar gave open invitation to HFCs for tying up with SBI for loans. There are specific RBI guidelines for tie-up of NBFCs with banks for loans termed as ‘co-lending’, however no such guidelines exist for tying of banks with NBFCs. On whether the RBI should come up with similar guidelines for HFCs, he said “Don’t send anyone to RBI, send them to SBI.”

On the sidelines of the India Mortgage leadership conclave, Kumar on the real estate industry, said real estate taxation is not favourable for companies. In its internal study, SBI has concluded that there has been a pick-up in the housing sales in Hyderabad, Kolkata & Chennai. However, it has declined in the NCR region, which, he said, is the worst hit. He said, “SBI is not seeing any elevated stress in housing portfolio, but we will have to watch.”

The government on Wednesday approved a Rs 25,000 crore fund to help complete over 1,600 stalled housing projects, including ones that have been declared NPAs or admitted for insolvency proceedings, as it looks to boost growth by steering consumption in real estate and associated sectors.

The move is likely to help 4.59 lakh housing units across the country. Continuing with steps she began announcing within a month of Parliament approving her maiden Budget, Finance Minister Nirmala Sitharaman said the Alternative Investment Fund (AIF) will comprise Rs 10,000 crore coming from the government and the remaining being provided by state insurer LIC and the country's largest lender SBI. The minister also said several sovereign funds have shown interest and may join the scheme at a later stage.

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