New Delhi: State Bank of India Chairman Rajnish Kumar on Saturday exhorted real estate firms to keep their bank account standard, clear inventory as soon as possible and improve perception about the business.
While plain-speaking to the real estate players, Kumar said course correction has to be undertaken by the industry if they want to survive and get back on track as soon as possible.
“Clear inventory as soon as possible. We believed that prices will go up but unfortunately the prices are not going up. There was a time when there were first time home buyers and there were investors and in five years you could double your money…those times are over,” he said in a virtual conference organised by realtors’ body NAREDCO.
Besides, he suggested that industry should explore opportunities to cut down the cost and improve turnaround time.
“How do we reduce the construction period? How do we keep cost under control on the construction material side? Industry should impress upon state and local governments that it is not a cash cow which you can keep on milking. So, let us reduce the cost of construction,” he said.
On the banking side, he assured, it would be the endeavour to keep interest rates low as much as possible, depending on macroeconomic situation.
The effort of everyone should be towards the objective of making housing affordable, and building units fast as well as selling them quickly rather than holding inventory for a longer period in anticipation of price rise, he added.
On perception about the real estate industry, SBI chief said, there is a need to improve corporate governance although Real Estate Regulation and Development Act (RERA) has brought in some discipline but still a long way to go.
“I am not saying this but the perception about the real estate industry is that a lot of profiteering takes place, a lot of under hand dealing takes place. Not all transactions happen in white. This may be reality or this may be perception I don’t know. These perceptions at the industry level needs to be corrected.
“As an industry body you can do something to improve corporate governance. RERA has made a lot of difference, demonetisation has sucked a lot of cash but still I believe a lot of projects we have not been able to control these aspects,” he said.
Observing that the role of the real estate industry in the economy is very crucial, he said construction is about 15 per cent of the GDP and it provides employment to a large number of people.
With regard to increasing moratorium beyond three months, Kumar said, the call has to be taken by the Reserve Bank of India.
However, he said, banks through Indian Banks’ Association will request for raising the loan moratorium period from the existing three months to may be 5-6 months depending on evolving situation.
On enhancing emergency credit line to industry from the existing 10 per cent to 20 per cent, he said, it can be considered on a case to case basis by the field level officials.
“Reassessment of working capital we are ready to do…you can approach the bank on revised cash budget. Based on the revised budget, we will give 10 per cent or 20 per cent depending on requirement. What I would suggest for getting all these help, you keep the account updated. Clear your dues. Keep your account standard,” he said.
He assured the industry that banks stand behind the industry in this difficult times.
Last month, SBI opened an emergency credit facility for borrowers affected by coronavirus outbreak. The additional liquidity facility – Covid-19 Emergency Credit Line (CECL), will provide funds up to ₹200 crore or 10 per cent of the existing fund based working capital.
The window will be available till June 30 and loan will be offered at an interest rate of 7.25 per cent with a tenure of 12 months.
This story has been published from a wire agency feed without modifications to the text. Only the headline has been changed.