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CREDAI accuses NBFCs for arbitrarily and unilaterally increasing interest rates on realty projects

Infra News - Published on Fri, 19 Apr 2019

Image Source: wikipedia.org
Money Life reported that crying foul about lenders 'arbitrarily and unilaterally' increasing interest rates and escrow requirements, the Confederation of Real Estate Developers' Association of India has requested the finance ministry to issue necessary guidelines to non-banking finance companies to keep rates in check. In a letter to the finance ministry, the developers' body says, the real estate sector is already under tremendous economic pressure and arbitrary and illegal practices lead to delays in projects and escalation of costs for the ultimate homebuyers. CREDAI said that "We, therefore, request you to have necessary guidelines issued to NBFCs that the interest rates on ongoing projects may not be revised upwards for as long as Reserve Bank of India does not raise the benchmark rates. Secondly, the escrow amount being withheld by the lender must be well within the norms stipulated by Real Estate (Regulation and Development) Act to ensure timely delivery to homebuyers. Thirdly, disbursements to ongoing real estate projects may not be stopped for next two years."

The developers' body specifically accused Indiabulls of abusing its position and creating a situation where it was financially strangulating projects. It says, "Indiabulls being one of the largest lenders in the financial sector is causing undue hardship for developers by creating a situation of financial strangulation. On the one hand, in the past eight months Indiabulls has increased the interest rate by 4.5% to 6% for all developers. Since RBI has been lowering benchmark rates, it is clear that the interest rate has been increased by Indiabulls arbitrarily and illegally."

CREDAI said that "To add to the misery of the developers and home buyers, Indiabulls has also increased the escrow percentages from 30% to 100% for many developers. Such an increase in escrow percentages is totally illegal and against the norms of RERA which requires 70% of the collections to be used towards construction and land cost only. With 100% of the collections going to Indiabulls through the escrow account, no money is available with the developers for construction of the project. Also disbursements are not being made by Indiabulls to carry out construction of the project."

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Posted By : Rabi Wangkhem on Fri, 19 Apr 2019
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