Allow banks to fund land deals: HDFC chairman Deepak Parekh

MUMBAI: HDFC chairman Deepak Parekh has called for permitting banks to extend loans for purchase of land and recognition of loans up to Rs 40 lakh as priority sector to boost affordable housing in the country. Parekh also said that cost of housing could come down by 20% if red tape in granting project approvals is reduced through e-governance.
At present, banks and housing finance companies cannot provide loans for acquisition of land.This is despite the fact that land accounts for up to 70-80% of the cost of an urban house.
" Developers have to then resort to high-cost funds from non-banking financial institutions, private equity and even from the informal sector, often paying interest rates ranging from 18 to 22% per annum. Even if a developer wishes to start construction immediately, approvals, particularly in certain large cities, take as long as 18 to 24 months," said Parekh. The delay, in turn, leads to cost overruns, which are eventually borne by the home buyer.