A New dimension to the development

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NEW DELHI: Facing a potential hit on nearly Rs 10,000 crore lent to builders and home buyers in Noida Extension, banks are planning to seek a special dispensation from theReserve Bank of India to do without setting aside funds for possible default on these loans.

"We will need the regulator's indulgence on the matter. This is an extraordinary situation necessitated by court rulings," said the chairman and managing director of a public sector bank.

The issue is expected to be taken up at the level of the Indian Banks' Association, the industry lobby group, whose management committee is due to meet this week.

Land acquisition in Sahberi and Patwari, where over 30,000 apartments and plots were sold, has been declared illegal by courts. TheAllahahad High Court is due to hear cases regarding more villages this week, but the fate of nearly 70,000 apartments in Noida Extension is uncertain.

Demands for higher compensation have spread to neighbouring areas too. Bankers, however, said that so far they had not faced any trouble in getting their dues as individuals usually stick to repaying loans. Builders, who were already stretched given the increase in input costs and a slowdown in demand due to the rise in prices as well as interest rates, were a bigger worry for lenders. Banks fear that some of the developers may use the court ruling as a ground to defer payments.

Around the time the HC decides on the petition for other villages in Noida Extension, bankers will discuss the prospect of IBA approaching authorities in Noida,Greater Noida and other government agencies to work out a solution that is beneficial to the interests of buyers and builders.

Source : Home loan blues force banks to approach RBI - The Economic Times
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  • Builders emerge as bigger worry for lenders

    Another one

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    NEW DELHI: Builders, stretched given the increase in input costs and a slowdown in demand due to the rise in prices as well as interest rates, are a bigger worry for lenders. Banks fear that some of the developers may use the court ruling in Sahberi and Patwari village case as ground to defer payments.

    Around the time the HC decides on the petition for other villages in Noida Extension, bankers will discuss the prospect of IBA approaching authorities in Noida, Greater Noida and other government agencies to work out a solution that is beneficial to the interests of buyers and builders.

    A bank chief said theGreater Noida Industrial Development Authority had pocketed the difference between the acquisition price and the price at which the land was sold to builders. "Since the Authority made huge gains, it should bear a part of the burden to pay higher compensation to landowners. This is the only way in which the situation can be salvaged," another bank chief said.

    Bank of Baroda chairman and managing director M D Mallya, who heads IBA, refused to comment on the issue. Most bankers that TOI spoke to were unwilling to disclose their individual exposure levels. Almost all of them said they had a small exposure tobuilders and home loans were not a source of concern and the Rs 10,000 crore was an industry estimate on the assumption that around 50,000 buyers would have availed of loans of around Rs 15 lakh each.

    Besides, only around 15% or around Rs 1,000 crore of the estimated Rs 7,500 crore sanctioned amount was actually disbursed. Loans were extended to builders. Bankers are of the opinion that more than them, it was private equity players who had provided funds.

    Though bankers were approaching RBI for a special dispensation, several of them conceded that going by past experience, the regulator might not be amenable to the suggestion. In case ofDabhol Power Company, where prompter Enron went bankrupt, RBI did not provide a special dispensation and forced banks to provide for bad debt, which affected their profits.

    In case of Noida Extension, all borrowers would not default and only a small part of the exposure would be affected. But banks are dealing with a unique situation where collateral, land, for loan has vanished.

    Source : Builders emerge as bigger worry for lenders - The Economic Times
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  • BOB & HDFC were distributing loan as if there was no tomorrow.

    There was a stay order in NE, Patwari village still it was OK with banks. What approval system these banks were following is a worry.

    SBI was the only bank which was not giving loan.
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