Dearer? Loans split bankers

The question of whether loans will be dearer has split banking and mortgage leaders.

Major realty players and mortgage leader HDFC today expressed apprehensions that bank loans would become costlier in the wake of housing finance racket coming to light,but State Bank of India sought to allay any such fear.

Global property consultant Jones Lang LaSalle (JLL) said bank loans would be dearer and lenders would be extra cautious in offering loans to developers following the housing finance scam racket.

“There will be repercussions in terms of increased caution by banks while lending to developers. Borrowing will become more expensive and the process involved in getting it lengthier as banks increase their vigilance levels,” JLL India Chairman and Country Head Anuj Puri said.

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State Bank of India (SBI) Chairman O P Bhatt,however,sought to allay any such apprehension saying that the housing finance scam would not have any impact on loans to the realty sector.

“We are always cautious when we lend and you know there are always bad loans… why should it impact (lending to real estate sector)”,Bhatt said.

“I won’t say that (the current system) is perfect. But there is no need for any alarm. I don’t think there is any systemic risk that we are talking about. These are individual cases”,he added.

Yes Bank Managing Director and CEO Rana Kapoor too said “it (housing finance racket) is just an aberration. It is exception to the rule so it is not going to have a serious impact”.

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Housing finance scam came to light with CBI yesterday arresting LIC Housing Finance CEO Ramachandran Nair and seven other senior bankers for colluding with Mumbai-based Money Matters Ltd to sanction large scale corporate loans,overriding mandatory conditions for such approvals and committing other irregularities.

The scam has spooked the markets and the reatly and banking stocks have taken a big hit on the Bombay Stock Exchange. Realty stocks tumbled by up to 18 per cent yesterday and the battering contiued today with realty index closing down by 6 per cent.

Banking shares too came under heavy selling and the sectoral index closed down 1.4 per cent today.

Top bankers arrested by the CBI included Naresh K Chopra,Secretary (Investment),LIC,R N Tayal,General Manager of Bank of India (Delhi).

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Hinting at a price correction in the realty sector as a fallout of the scam,HDFC Chairman Deepak Parekh said every lender will become “cautious” while lending to companies in the real estate and infrastructure sectors.

“Some developers will bring prices down and sell…the unsold stock with developers is huge across the country. In this scenario,prices cannot go up definitely,” Parekh added.