Thus goes the famous saying: "Banker is a man who lends you an umbrella when the weather is fair and takes it away from you when it rains." The season of "what developer should do now" has arrived once again and it is mostly coming from banks who literally own real estate business today. The hapless and helpless developers are repeatedly told by the eminent speakers to sell the inventory by making big cuts in prices and forget making profits. The rider is, all this has to be done without causing any loss to the bank. Worst, all this has to be done to avoid any harm (read NPA), to the bank which seems to be the primary objective of the golden advise. It is neither wisdom nor intelligence that every economic and commercial activity, small or big, is influenced, controlled and even owned by the banking system. Well, then, isn't it imperative for the banks to take the first step in their own interest? Here's how banks can help the developer sell, help the customer buy and help the bank build good books during this crisis. Rate of Interest: 6% rate of interest on home loans across all budgets can rekindle the desire. And this isn't a big ask. We are already close to 7%. Customer gives equal importance to the ROI of home loan and selling price of Apartment. Longer Tenure: Life expectancy and working age has significantly increased. A 40 year loan coupled with lower interest rate can bring down the burden of EMI dramatically. This will go a long way in easing the pain of pay cuts caused by the lockdown. Fixed Obligation Income Ratio (FOIR): Today, a home buyer is not dependent on single source of income. Second income or even a third income has become the norm. A relaxed FOIR, say 75%, can significantly increase the loan amount which in turn can help him buy a bigger house with bigger budget and/or will bring down self-contribution. Loan to Value (LTV) ratio: With foreclosure norms firmly in place, the delinquencies have come down to negligible levels. Home Loan has always been the best loan on the books of banks. 100% funding of the agreement value will be a big selling point, though the customer will have to bear Stamp duty, Registration, GST and Other Charges. If banks offer above sops and developers take complementing steps, the sale quantum can double immediately after lockdown, not only easing the cash flow of developers and banks but also will catch up with the backlog.
Come on banks, show a big heart. The nation banks on you.
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