The urban development ministry has drafted a bailout package for the real estate industry, which would be shortly sent to the finance ministry for consideration. The ministry has called for relaxation in norms for foreign loans so that realty companies can tide over the liquidity crunch, urban development secretary M Ramachandran said on Monday. The note has also urged the finance ministry to consider other sops like rescheduling of total debt of the real estate industry and reduction in home loan rates for affordable houses. “We have included some of the demands from the National Real Estate Development Council (Naredco) in the note.

Once the finance ministry clears the package, it will go for Cabinet approval,” Ramachandran said. Naredco has asked for a reduction in the interest rate on home loans by at least 3-4 %. The rate of interest on home loans has drastically gone up from around 7.75% in 2004 to around 12.75% now. Almost 90% of home buyers opt for loans to buy homes. But with the hardening of interest rates, and liquidity crunch in the market, demand for houses has been hit. The council has also asked for rescheduling of bank debt to real estate developers with a moratorium of one-two years. The total debt of the real estate is to the tune of Rs 25,000 crore, a Naredco statement said.

The industry body has also asked for an easing of norms for foreign loans and declaration of ongoing projects as NPAs. Meanwhile, to bring about correction in the property prices, the Naredco has asked its members to cut prices by reducing costs, cutting profit margins, reducing advertising and brokerage costs. Its members include DLF, Ansal API, Unitech, Parasvnath Developers, Sobha developers and several other realty companies. There are several factors working against the Indian real estate sector. Banks are getting jittery over loan disbursals to real estate developers. Even if the developers manage to get loans from banks, they are hardpressed to keep more collateral with the banks. To further aggravate the situation, the property market has also been witnessing a drop in PE fund flow.

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