With RERA in, realtor lending rises

MUMBAI: The flow of loan funds to property companies is accelerating in lockstep with financing demand from home-buyers, with new laws on real-estate development giving non-banking finance companies (NBFC) and home-financiers the confidence to lend more to builders.

From July 1, 2017, the Real Estate Regulation and Development Act (RERA) came into force in various states, including large property markets such as Maharashtra and Gujarat that are in the forefront of implementing the legislation. The market share of NBFCs and housing-finance companies in real-estate developer financing has grown to 60 per cent from 30 per cent in four years. Among the NBFCs, HDFC, IndiaBulls, and JM Financial have 20 per cent exposure to developer loans.

“The pick-up in developer loans is even stronger, indicating traction in new project launches in future,” said Digant Haria, analyst at Antique Broking. “Lenders are happy to lend to RERA-compliant projects.
 
The increase is largely because of the adoption of RERA by various states. Developers launched projects only after they got clarity on RERA guidelines. Project launches, or fresh housing starts, have now increased across the country.

There are 21 states, including Maharashtra, Gujarat, Madhya Pradesh, and Rajasthan, that have adopted RERA. Incidentally, these states have also seen traction in affordable housing. This segment has grown faster than the individual home loan segment and also offers better margins.

LIC Housing Finance disbursed Rs 2,266 crore of project loans in the fourth quarter ended March 31, 2018, growing 80 per cent on year. Developer loans now make up 5 per cent of the Rs 1.66 lakh crore loan book for the home financier.

PNB Housing Finance has also seen strong business growth with disbursement up 45 per cent year-onyear, with a large part of sequential growth being driven by construction finance. L&T Finance saw a 56 per cent growth in real estate finance. Even for the largest mortgage lender HDFC, non-individual loan book grew 17.3 per cent in the last financial year, while retail loans have grown by 20 per cent.

Source- ET Realty