Real estate stocks crash as RBI tightens sector norms

Commentary

oi-Sunil

By Sunil Fernandes

Updated: Wednesday, September 4, 2013, 10:23 [IST]

Real estate stocks crashed in trade today as the RBI tightened norms for home loan disbursements. Shares in India's largest real estate player DLF dropped 4 per cent, while Sobha Developers and Indiabulls also fell 4 per cent each.

Other real estate stocks that declined were HDIL, Anant Raj and Godrej Properties.

The Reserve Bank on Tuesday asked banks to link the disbursal of home loans to stages of construction to protect the interests of buyers and contain the fallout of "innovative" housing financing schemes.
"In view of the higher risks associated with such lump-sum disbursal of sanctioned housing loans and customer suitability issues, banks are advised that disbursal of housing loans sanctioned to individuals should be closely linked to the stages of construction of the housing project/houses...," an RBI notification said.
Upfront disbursal "should not be made in cases of incomplete/under-construction/green field housing projects," it said.
The notification follows the introduction by some banks of "innovative housing loan schemes" in association with developers/builders, where upfront disbursal of housing loans is made to builders without being linked to the various stages of construction.

The real estate sector has already been grappling with the Land Acquisition Bill, which developers say will increase the prices of real estate and elevated interest rates.

With inputs from PTI