In order to tackle the liquidity crisis in the Indian real estate market, the union Finance Ministry announced that the National Housing Bank (NHB) will infuse an additional Rs. 10,000 crores in non-banking financing companies. Although the move seems to address the need of the hour, real estate experts seem not very happy and enthusiastic about it.
Under the plan announced in the Budget, the government will offer a one-time six-month partial guarantee of Rs 1 lakh crore to public-sector banks (PSBs) for purchasing consolidated high-rated pooled assets of financially-sound NBFCs. This will cover their first loss of up to 10%.This infusion will be over and above what the NHB would provide to the HFCs through its two existing refinancing schemes.
NHB is the one responsible for providing loans to small housing finance companies (HFCs) at cheaper interest rates. Liquidity infusion by NHB should ease the fund crisis by increasing the availability of funds for HFCs. However, real estate experts reportedly feel that the liquidity infusion won’t be of much help.
Reacting to the announcement, Aadhar Housing Finance MD and CEO Deo Shankar Tripathi told Housing.com, “Based on the 15 per cent of net owned fund (NOF) criterion, the amount available to HFCs having NOF of Rs 50 crores or Rs 200 crores, will be inadequate.
NHB may consider increasing the NOF criterion to at least 40-50 per cent, keeping the other criteria same or even reduce the upper limit of Rs 500 crores to Rs 400 crores.”
Elaborating on the grim situation of lending by HFCs, Tripathi said that only a handful of small HFCs are actively lending at present and this benefit will go to the “bigger HFCs, which are less affected by liquidity crunch.”
NBFCs, including HFCs, have been facing liquidity issues after one of the largest shadow banks in the country, IL&FS Group, defaulted on loan payment last year.
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