Explore sale of stalled home project loans to ARCs

Last Updated: Fri, Dec 07, 2012 07:42 hrs

pTo push the housing sector the Union finance ministry wants public sector banks PSBs to explore the idea of selling their loans on stalled residential projects to Asset Reconstruction Companies ARCs Such a move would also contain the hit to banks&rsquo balance sheets from the delayed projectsppA senior National Housing Bank NHB executive confirmed a discussion on the issue at a meeting PSB chiefs had with Finance Minister P Chidambaram in November Among the points which came up were that restructuring norms for these housing projects be made similar to those for infrastructure And that banks could transfer such projects to ARCs against securitisation against future cash flows of the projects and let the ARCs complete these projects a senior bank executive said Banks could invest in ARCs to support the completion and there could be a tripartite deal between the banks ARCs and buildersppAccording to the Indian Banks Association the number of incomplete dwellings is about 100000 in Delhi and 90000 in Mumbai Considerable delay in starting the projects due to getting statutory clearances had pushed project costs up almost 50 per cent A PSB executive said the Confederation of Real Estate Developers Associations of India Credai had asked for better financing to complete all pending projects NHB was working out steps in this regard in consultation with Credai According to the proposed arrangement on stalled projects banks would get money upfront from an ARC to be raised from investors in securities The cash flows from sale of units in the housing projects would be used to pay the securities&rsquo investorspptable width400 cellpadding2 tbody tr height20 styleheight 15pt td width387 height1 bgcolor95acb3font size2 faceTahoma colorffffffstrongTHE RECOMMENDATIONSstrongfonttd tr tr height20 styleheight 15pt td width387 height56 bgcolorccd7dd ul lifont size2 faceTahomaDelink these loans from commercial realty portfoliofontli lifont size2 faceTahomaAllow restructuring based on norms similar to infrastructure loansfontli lifont size2 faceTahomaARCs to be involved in completion of stalled projectsfontli ul td tr tbodytableppA head of a large ARC said some banks had approached it with proposals to buy out loans to stalled projects &ldquoIn some cases the approach is on their initiative and in some it is motivated by promoters The collateral may be strong Still we have to bear the cost of recovery and also have to generate profit This is possible only when we buy the loans at a discounted price&rdquo he said Banks on the other hand want the full dues to be paid upfront by ARCs Besides the issue of pricing of loans it is not clear how the problems faced by delayed projects would get resolved just by transferring such debt said an executive with one of th largest ARCsp

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