Scam may hit property prices: Parekh

Parekh said every lender will be “cautious” while lending to companies in the real estate and infrastructure sectors and added that some developers will have to reduce their prices and sell excess inventories.

“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,” he said.

Lenders will have to strengthen their loan sanctioning and disbursing processes in the wake of this incident and there should be a proper analysis of proposals,Parekh said.

He also wondered why did the beneficiary companies in the scam had to go to a middleman at all in a surplus liquidity situation when the lending has happened. “The borrowers should directly approach banks. We do not entertain middlemen,” he added.

The Central Bureau of Investigation (CBI) had arrested eight people including the CEO of LIC Housing Finance,some bankers and two executives from Money Matters who acted as middlemen in connection with a housing-finance racket.

According to CBI,working in collusion with the loan arranger Money Matters,bankers sanctioned large loans to corporates,overlooking regulatory guidelines for granting such approvals,for their individual monetary gains.