"Realtors are struggling to get the approvals for affordable housing"

 

As Real estate market is facing downturn due to high property prices and increasing interest rates. So due to this crisis affordable housing remains dream for Aam Aadmi. In an exclusive interview with Mr. Lakshman Bhagtani is Joint-Treasurer of Maharashtra Chamber of Housing Industry (MCHI) shares his views on real estate crisis.

Q1. According to the realty experts there are less chances of reducing property prices, what do you say?
A1. There are no chances of getting property rates reduced due to the following reasons:
More than 65% of the existing buildings in the island city and suburbs are under redevelopment.
The unfortunate part in the case of redevelopment is that after the agreements are signed, about 10% of the members/tenants back out in spite of having signed the resolution unanimously of the society in respect of redevelopment.
Now these 10% flats are occupied by them on different floors as such the existing building cannot be demolished in spite of 90 percent members of society and/or tenants having signed the resolution, having signed the agreement with the developer. The plans having been approved, due to such reasons the supply of the land in the market becomes scarcity, therefore I see no changes of reduction in the property prices.

Q2. As per the reports property rates are high and home loan rates too, so it means affordable housing remains a dream for Aam Aadmi in Metros particularly in Mumbai, isn’t it?
A2. It is due to scarcity of land and the scarcity is due to the owners of the property often changes the price looking to the appreciation of the property. The tenants suddenly back out and ask for larger accommodation, free of cost in the vicinity as such the cost of land in the hands of developers is too high. Due to such speedy escalation in the rates of land and the flats which are final product of the land the Aam Aadmi does not think of the affordable housing. It is no more a secret that graduates are staying in slum on rent. The Developers are struggling to get the approvals for affordable housing presuming the developer has land then to there are great amount of hassles, which could be resolved only by the Competent Authority.

Q3. Will real estate market go down as new norms are introduced by state government such as, it essential to produce a building sanction plan and structural safety certificate as a prerequisite to any form of registry? Average of registration of property 100 per day but now 7 to 8 registrations only per day.
A3. With regard to the lesser registration per day, reasons are (i) there are lesser properties available with approvals, (ii) the stamp duty ready reckoner gets revised every year, unfortunately. (iii) The Customer co-relate his purchase timing with the share market, presuming when the share market will go down the rates of real estate will also come down, but he over looks that the share market being speculative, it jumps heavily and suddenly due to the purchase by local and international financial institutions, (iv) The Customer co-relates his buying expecting that the rate of interest of financial institution shall one day come down, which has been a dream, (v) The Customer looks at the eye-catching news that the prices will crash as such is stamp duty, which is 5% shall also come down,

Q4. Will slowdown in International real estate market affect to Indian Real Estate Market?
A4. There is different logic to the demand and supply of respective country. For instance, Dubai has over residential supply but the visa rules are stringent as such hardly anybody is able to settle there forever. For instance USA due to the subprime lending i.e. security of the premises was sold by one institution to another institution and bankruptcy declared by top most financial institution. The mega metro city like Mumbai is facing genuine problem of infrastructure. I shall give you simple example, I have sold building near Worli Sea Face at the rate of Rs.125 per sq. Ft. (carpet area) in the year 1973-74 and the rate today in that building is commanded as high as Rs.45000/- per sq. Ft (built up area).

“CIBIL is defaulters list the very common misconception”

 

The establishment of CIBIL is an effort made by the Government of India and the Reserve Bank of India to improve the functionality and stability of the Indian financial system by containing NPAs while improving credit grantors’ portfolio quality.

“It is very important to understand that CIBIL is not a defaulters list. This is a very common misconception. CIBIL is an information repository of both positive and negative information about the borrower. This includes information pertaining to individuals who are making their payments on time as well as those who are in default” Mr Arun Thukral- Managing Director CIBIL said while talking with this newspaper.

Q1. Once CIBIL (Credit Information Bureau India Limited) added someone into defaulters list then he/she has been banned for life time or for specific period?

It is very important to understand that CIBIL is not a defaulters list. This is a very common misconception. CIBIL is an information repository of both positive and negative information about the borrower. This includes information pertaining to individuals who are making their payments on time as well as those who are in default.

CIBIL does not ban any borrower, neither does it provide any opinion, indication or comment pertaining to whether credit should or should not be granted. The credit grantors who have received an application for credit will make their own credit decision depending on their risk management policies.

Q2. What is the procedure to remove name from defaulters list?

As mentioned earlier CIBIL does not maintain any defaulters list. However, if a borrower is showing negative credit behaviour in the CIR, there are ways to improve his financial standing going forward which would be reflected in his credit history available with lenders on request –

• Always pay your dues on time. Late payments are viewed negatively by lenders

• Keep your balances low. Most lenders review the total outstanding debt of a potential borrower (across all types of accounts) and the amount of debt used in proportion to the amount of debt sanctioned to the borrower by the lender

• Maintain a healthy mix of credit. Your CIBIL CIR should contain a mix of a home loan, auto loan and a couple of credit cards. The more the number of credit cards with high utilization, the larger are the payments resulting from the high interest rate resulting in your ability to service additional debt obligations

• Apply for new credit in moderation. Your ‘Credit Hungry’ behaviour indicates your increasing debt burden

Q3. Where does CIBIL get the information from?

CIBIL collects and maintains records of an individual’s payments pertaining to loans and credit cards. These records are submitted to CIBIL by banks and other lenders, which are members of CIBIL, on a monthly basis. This information is then used to create Credit Information Reports (CIR) which are provided to lenders in order to help evaluate and approve loan applications.

Q4. Is there any individual credit rating possible if and what is the procedure?

Yes. This is called as a Credit Score and it is one of the most common tools for credit lending around the world. It is generated basis the individual’s credit history and is used to determine the specific level of risk associated with the individual.

In India, the CIBIL TransUnion Score is the only implemented generic scoring model, which through advanced analytics assigns a number between 300 and 900 to a borrower, based on his/her credit history. The higher the numerical value of the score, the lower is the risk profile of the individual.

The CIBIL TransUnion scoring model uses various attributes based on credit behaviour information for determining the credit score. And while many of them are proprietary in nature, the majority of the score is made up of the following elements:

• Credit Utilization: how much credit is this consumer using?

• Defaulting: how many accounts are past due – by how many days and by how much?

• Number of inquiries: has this consumer applied for additional credit lines?

• Trade Attributes: How old are this consumer’s lines of credit? What type of credit does he have? Does the consumer have a good mix of credit or is it all credit cards?

Q5. How can an individual consumer access his/her CIBIL Trans-Union Score?

Consumers can now access their CIBIL Trans-Union Score directly from CIBIL.

Consumers can purchase their CIBIL Trans-Union Score along with their CIBIL Credit Information Report (CIR) for Rs.450. The payment can be made by following an online payment procedure or through a Demand Draft. They will have to submit their own identity proof and address proof documents along with the application form and online payment receipt or Demand Draft. Further details on the CIBIL Trans-Union Score for consumers are available on the CIBIL website https://www.cibil.com/d2c

Q6. Individual corporate or non members of CIBIL could access the database of CIBIL?

Individuals and corporates can access their own Credit Information Reports (CIR) from CIBIL.

Credit institutions, which are members of CIBIL, can access credit reports of loan applicants for risk management. CIBIL works on the principle of reciprocity, which means that it will only share the information with its members who share their data with CIBIL, for credit risk management.