INS512 PERSPECTIVE ON REAL ESTATE SECTOR

INDIVIDUAL REFLECTION

Name: Mohit Chandak

Enrolment Number: AU1811309

Submitted to: Prof. Parag Patel

Financial Infrastructure in Real Estate

Developer Loan
Individual Finance Loans

A national housing bank (NHB)​ is a subsidiary of RBI.

In 1970, HUDCO started giving out loans for the houses built by them
90 housing loans companies are presently governed by RBI and NHB

IMGC​ is an international concept, it gives comfort to lending institutions by providing a

guarantee of a certain amount for the borrowers in return of a premium charged from borrowers.

Credit​ ​Bureau​: It is a data collection agency that gathers credit information of various
individuals and then sells the same to the creditors.

RERA: ​It is a Govt agency that regulates the real estate industry.
Sarfesi​: Before SARFESI, it took long to recover the loans. Sarfesi accelerates and short circuits
the long process as posession is given virtually.

Cersai​: It is a website which mentions that property put up for sale is sold or not.

NHB

Foreign investors find India attractive as there's a huge potential to earn. Also due to bodies
regulating, malpractices have decreased. It's role was Promotion and Development, Regulation
and Refinancing.

Distress Funding
Banks are very careful in lending to builders because there are changes in the capacities
happening. There's a huge risk people think of buying a house that has not been built. Also, real
estate companies go under frequently. ​Distress Asset Fund is the solution

Blue line housing

Pre EMI​: The loan is taken in installments and interest on these is Pre EMI, until EMI starts.

Escrow​: If a lender gives a loan to a developer, 3 months interest is kept in an account for some
assurance.

Funding Sources Available to Developers

● Earnings from Previous Projects

● Foreign Investments
● Private Equity and Capital markets
● Pre Launch Investors
● Bookings- Post Launch
● Banks/ FIs/ NBFCs/ HFCs

Appraisal of a Developer (Project)

● Credit
● Technical
● Legal

Appraisal of a Developer (Project) - Credit

Construction Finance eases the cash flow requirements of Developers during project construction
stage.

There is a need to check:

● Does the developer have legal rights

● Does the developer have serving capacity
● Developer's past credit history

Appraisal of a Developer (Project) - Legal & Technical

● Ownership or development rights of lund

● Local permissions
● Ongoing site visits
● Meeting RERA requirements

Challenges Faced by the RE Industry / Developers

● Funds
● Various in due construction sites
● Dependency on HFCs/ NBFCs
● Low interest of PE players in Residential projects
● Structural & economic reforms and policy changes
● Dated construction technologies
● Demand and supply gap

Funding Sources Available to Individuals

● Banks
● NBFCs
● HFCs
● Self

Appraisal of an Individual - Credit

● Individual applies for a loan to buy or build a home.

● Considerations while assessing an individual
● Formal or informal sector
● Salaried or Self employed
● Single or Co borrower
 ● Ready or under construction
● Developer or Re-sale

● Loan amount is linked to: Ability to service the loan and Cost of property.
● Documents need to be submitted
● Determine loan amount

Appraisal of an Individual - Legal & Technical

● Property
● Type of transaction
● Individual would have to submit different documents
● Ownership development rights of property
● Local permissions / approvals
● Ongoing site visits to check the progress of work and quality of construction
● Independent valuation of property
● Technical verification of cost & details of amenities

Data is the oil, and analytics is the engine

The Future of Lending : 2025

● Data
● Technology
● Artificial Intelligence
● Analytics