CREDAI (Confederation of Real Estate Developers' Associations of India) fears Drastic Reduction in Credit because of Housing Scam

The Confederation of Real Estate Developers’ Association of India has said that “painting” the ‘loan-for-bribe’ as a scam, would lead to drastic reduction in credit for real estate companies. Bankers would become extremely wary and hesitant to lend to realtors and given the shortage of housing, it would be detrimental to both customers and homebuyers, said Mr Lalit Kumar Jain, Vice-President, CREDAI.

Mr Jain said the association is writing to the Reserve Bank of India asking it to direct banks to accept or reject developer applications within a certain timeframe — a month or so — and whether their loan applications are acceptable or not. On the scam, he said stray incidents should not be generalized. Advances made to real estate sector were secure as banks insisted on the personal guarantee of the developer, besides collateral security which was invariably 1.5 to three times the loan amount.

Mr Jain said it should also be understood that availing of liaison services of merchant or investment bankers by developers was routine, while adding that association condemned “all acts of facilitation” for loans. On reports doing the rounds that Kumar Urban Development (earlier Kumar Builders) was among the names on the CBI list, Mr Jain, who is also the Chairman and Managing Director of Kumar Urban, said his company was in no way involved in the issue.

HCC, in a statement said, “Money Matters Financial Services is associated with our companies on a fee based arrangement where they act as an agent for selling our properties. “In our companies we work with several firms for raising funds and all our transactions are completely transparent and through cheque payments. Money Matters was one of the advisors during the sale of HCC Real Estate-developed 247 Park at Mumbai. HCC Real Estate paid a fee of less than one per cent to Money Matters for coordinating the deal.

“Similarly, in the case of Lavasa, Money Matters is associated with the company on commission or brokerage basis, to the tune of 1-2 percent of the value of the transaction.” Oberoi Realty, reacting to reports of involvement in the loan scam, said it was a zero debt company. The company (including its SPVs) has no debt from any bank or financial institution for the last two years. It had not taken any loan from LIC, LIC Housing Finance, Bank of India, Central Bank of India and Punjab National Bank. Moreover, Oberoi Realty had never dealt with Money Matters for any transaction whatsoever, the company spokesperson said.

The Sigrun Group, a listed entity, also denied all reports associating it with the scam. The Sigrun Holdings, its subsidiary companies and group companies have not availed of any credit facilities from LIC or LIC Housing Finance or any other public sector bank. Further, it has no business relationship with Money Matters Financial Services, the group said.