Goodbye Banks, Hello Homes! Banks May Not Be Involved in Reviving Housing Projects

Banks may give up their rights to help revive housing projects that have been stuck for a long time.

This news came after a discussion of CEOs and important banking industry officials regarding the issue. They agreed that new lenders offering priority funding should have the first claim over assets and cash flow.

Many housing projects across the country have been delayed for years, leaving millions of home buyers in a difficult situation.

According to a report by ANAROCK, a real estate services company, there were around 4.80 lakhs unfinished units worth over Rs 4.48 lakhs crore in the top 7 cities as of May 2022. According to a banker, the value of all the stalled projects in India would be more than Rs 5.5 lakhs crore.

In the past, banks were reluctant to give up their rights to receive money from these projects. However, now they see that they have little to lose since most of these projects are classified as NPAs (non-performing assets). Some banks believe it is the right time to make this change because the real estate market is improving.

Completing these stuck projects largely depends on new lenders willing to provide fresh capital. These lenders, like the SWAMIH Fund, managed by SBICAP Ventures, want the first claim over the cash flow once the home buyers start paying the remaining money. Banks are realizing that holding on to the first claim is not helping because the money has been stuck for years, and the project costs keep increasing.

A Supreme Court ruling on the Amrapali case partly influenced the decision to restart these projects. The court found that the authorities and banks had failed to protect home buyers who the builders cheated. As a result, the court directed the government to help these buyers, and the SWAMIH Fund was created.

This change in the approach by the banks is expected to bring relief to the home buyers and help complete the stalled housing projects.