The National Housing Bank's direction to housing finance companies to desist from providing loans under subvention scheme will lead to increase in interest cost for homebuyers and aggravate the liquidity crunch faced by real estate developers, according to two apex bodies of the realty industry.
Worried over frauds by builders, the National Housing Bank (NHB) has asked housing finance companies (HFCs) to "desist" from offering loans under interest subvention scheme wherein real estate developers pay pre-EMIs (equated monthly instalments) on behalf of homebuyers for a certain period.
The direction has been issued by the NHB in view of several complaints of frauds allegedly committed by certain builders using subvention schemes.
When contacted, CREDAI President Satish Magar said, "It should not have been done. This will increase the interest cost for homebuyers as builders were paying EMIs on behalf of customers for certain period. There was not much harm from this scheme".
He, however, ruled out any negative impact on housing sales and liquidity situation of developers.
But, NAREDCO President Niranjan Hiranandani is of the view that this move will further affect the project funding.
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"In the aspect where it seeks to control frauds, it is obviously welcome, although the side effect will be further drying up of project funds," he said.
The real estate industry is "desperately" looking for the government support to come out form the liquidity crunch, Hiranandani said.
He stressed the need for alternative funding sources for the developers.
Anarock Chairman Anuj Puri said, "This will definitely put even more strain on many developers' already precarious liquidity situation."
Ozone Group CEO Srinivasan Gopalan said, "This is good in the long run for developers. However, we do not appreciate any abrupt change overnight. This throws the entire planning out of gear."