Need framework to identify Good Bad realtors Housing Secy

New Delhi: The real estate conference organised by CII felt that there was need to identify good and bad real estate developers. Addressing the conference, union secretary Ministry of Housing Manoj Joshi said that “credible framework” for this purpose was must. He said this would enable the real sector to easily access credit from banks to build projects without being dependent on the customers money.

Joshi said that real estate projects, especially housing, are largely funded through customer advances and said this model needs to be changed. He suggested that the credible framework could be a rating system and appraisal of past performances. Joshi pointed out that one of the main reasons for the delay in the construction of projects is cash flow issues. He said there is no bank finance at the level of main contractors and small vendors, which leads to project delays and cost inefficiencies. "Are we helping our economy by not providing finance to such an important segment of our economy?" he asked. "We are hurting far more," he quipped.

"We have had black sheep in the sector, and probably that guides our entire prudential policy of whether finance should go in this sector or not. Everyone agrees that finance is required in this sector, but because of those black sheep everyone fears taking action forward," Joshi said. In general, the secretary said the banking industry makes a policy to treat everyone same be it a good borrower or bad borrower, unlike market borrowing. "...since we have more of a public sector banking industry, our appraisal systems are not so sharp," he said.

Joshi said financial institutions are unable to differentiate between bad projects and good projects. "...in the real estate sector, because of few bad projects, a few bad borrowers, you brand the entire sector as bad case for finance and we don't liberalise the finance to this sector," he added.