Mumbai Real Estate Companies Allowed To Raise Overseas Funds

By Author: indiahomes marketing
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The real estate situation in Mumbai doesn’t seem to be getting better in the near future. The Mumbai property prices continue to be skyrocketing and completely out of reach of common man. As a result, the sales of low cost housing properties are stagnant. It is only the riches who afford to live in their own homes in Mumbai; especially these days when due to very high prices no further purchases are taking place in the mid segment.

In a recent attempt, Reserve Bank of India has initiated to allow builders and real estate developers to procure funds from overseas using which they must come up with economical and low priced residential projects. According to the new directive issued by the Reserve Bank of India, real estate developers and their financing companies can raise a sum of $ 1 billion during the financial year 2012-13. This directive is valid only for low budget residential housing schemes. For the financial year 2013-14, the directive shall receive further reviewing in order to define future borrowing limits.

Evidently Reserve Bank of India has opened up this foreign loan window to aid low cost residential ...
... schemes however a little has been done to ascertain compliance on earlier such initiatives executed by builders including Powai and Hiranandani Estate who illegally utilized land allotted to build low cost housing schemes and instead constructed luxury and super luxury flats on the very land mass.

In order to ascertain future compliance and due diligence to the directive, Reserve Bank of India has added an additional clause for the builders and financing companies to follow according to which these bodies must have a minimum five years of experience in constructing housing projects and must not have evaded any sort of monetary obligations. Real estate developers and financing agencies with clear track record in financial commitments are only eligible to procure loan under the scheme.

According to the directive issued by Reserve Bank of India, only those residential and housing finance companies are eligible to raise funds from overseas under the scheme that have a capital of INR 50 crore and more. The maximum limit of bad loans for these companies is defined to that of 2.5 per cent. Any residential and housing finance company having bad loan beyond the limit is ineligible under the scheme. These companies must have minimum net funds of INR 300 crore during the last 3 financial years and then only they come eligible to procure funds from the overseas.

The directive further states that the interested real estate builders must have a clear track record and should not be involved in any sort of litigation. It is also made compulsory that the proposed low cost housing project should fully confirm with the provisions of development / construction plan of the area.

While the builders’ community is appreciating Reserve Bank of India’s move as it helps them sustain through low liquidity market, many financial advisors are condemning RBI’s decision as they find it as biased move. According to them, RBI has completely overlooked the long term impact of such an initiative. Allowing real estate builders and developers to procure funds from foreign markets would mean further empowering the builder community that already belongs to luxury segment in Mumbai and the neighboring areas.

Author Bio :

Nitin Sabharwal is an enthusiastic marketing explorer who redefines prospective subjects for his works in digital advertising & marketing, e-commerce, and content development. With a commanding work experience of 16 years, Nitin’s participation in digital enabled services with a special emphasis on the Internet has earned him several respectable positions in India’s premier companies. Positioned as VP-Marketing of IndiaHomes, Nitin is maneuvering the company’s branding, Performance, CRM, Contact Centre, Event Marketing and Digital Marketing. Academically, he holds an MBA degree from IMT Ghaziabad. Mumbai property prices, real estate developers, luxury segment in Mumbai