Excess reliance on foreign funds in realty not good: HDFC

January 10, 2008	(3 votes, average: 3.33 out of 5)  Loading ...
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HDFC has cautioned the Government against the plentiful flow of foreign capital into the Indian property market. Speaking on the same, HDFC Chairman Deepak Parekh said that the government should allow pension and provident funds to invest in real estate sector.

Citing the example of South- East Asian Crisis, he further said that the Government’s key role must be to ensure a diverse source of funding for the real estate sector. New funding sources like provident and pension funds be encouraged, so that India never faces such a crisis. These funds account for a substantial part of financial savings of the household sector and are long term in nature.

He also added that the primary objective of these funds is to provide social security. It has been a long-standing demand that a portion of the resources from the pension and provident funds should flow towards investment in the housing.

There has been a deluge of funds flowing into the realty sector and regulators have rightly been cautious on various funding mechanism, especially where undue advantage has been taken on account of loopholes in the system, Parekh said.

Even though the real estate sector has a capacity to absorb huge amount of funds, he said the industry must be cautious in over-reliance on foreign funds.

He also said that housing finance lenders are important players who provide long-term loans for housing sector. It would be appropriate for the government to treat bonds of housing finance companies with good rating as eligible investment for provident funds.

Stating that provident funds crave for diversification of investment avenues, Parekh said the benefits of the housing sector having access to provident and pension funds are manifold as it would allow the lenders to raise tenor of home laons to up to 30 years.

Increasing the tenor was necessary in view of the rise in real estate prices, he added.

News Published Under:   Real Estate Developers |

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