• How RERA Has Impacted India’s Home Loan Market?

    The process of Real Estate (Regulation and Development) Act, 2016, popularly known as RERA, has been a tedious one. The Act sent everyone out of their comfort zones. Both homebuyers and developers went into caution mode. There was anxiety, stress and fear of what lies ahead. Developers were thrown off gear and could not sign agreements with buyers as their projects were not RERA-compliant. Sales in the real estate sector suffered a lot as the Act completely stopped pre-launch sales.

    RERA has now been implemented in 25+ states and things are looking up now. There is still a bit of scepticism though. While the new real estate rules and regulations affected the sector in general, it also impacted home loan sales. MG Vaijinath, chief general manager, real estate & housing business of State Bank of India, in an interview with Bloomberg, shared his experience with RERA recently and what lies ahead. He said that during the last quarter, “the growth in our loan book was very large.”

    Mr. Vaijinath then spoke about the reduction in volume in the first quarter but is hoping that the home loan disbursal process will stabilise in the coming months. He agreed to the fact that because of RERA, there has been a slowdown in the home loan sector. His company grew at 14 percent in the first quarter of 2016. But RERA and the company’s internal merger impacted the first quarter loan growth. Now that festive season is here, he expects growth to pick up. In 2016, the growth level was 15 percent. In coming years, it can well be 16-18 percent.

    Meanwhile, Sudin Choksey, managing director of Gruh Finance Ltd., also spoke on the target for financial year 2017-18. He wishes to maintain a 20-25 percent loan growth. Many experts believe that as a result of RERA implementation and other government policies, the economy needs to be kick-started and taken to a higher level. Housing will grow and the growth will multiply next year onward. Even though volume of transactions has not slowed down, transaction values have definitely dipped.

    Mr. Choksey believes that the rate of product launches has gone down significantly at the higher end of the market. He also spoke on movement of loans among lenders and that the movement will be more from housing finance companies to public sector banks. This is quite contrary to numerous reports talking about transfer of home loans from public sector banks to NBFCs.

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