LIC Begins Funding Builders

LIC Housing Finance (LICHFL) has emerged as a reliable source of fund for several cash starved developers, even as banks tighten credit.

The financial institution has lent small-ticket loans ranging from Rs 100-150 crore each to, at least, four NCR based realty firms in the past three months, while banks were refusing to disburse even sanctioned loans.

NCR based BPTP, Uppal Group and listed developer Vipul received funds from LIC Housing Finance in the past three months, as credit situation worsened for the real estate sector.

Housing Finance has also revived the earlier sanctioned loan for Delhi based Omaxe. In each case, loan amount ranged from Rs 100-150 crore.

Many developers, who have borrowed from LICHFL this year, are seeking a moratorium for one year, as they face fund crunch. Unitech has been granted a moratorium for part of its total borrowing.

Top executives, including the promoters, of several realty firms are doing the rounds of LICHFL office these days. That several realty players, including DLF and Parsvnath, have also approached the institution for credit.

The entire real estate sector is going through a difficult phase, as sales have diminished and credit tightened. Many developers still need large cash to continue construction and pay for the land they earlier bought, even as earnings have dramatically slowed down.

Besides the availability of credit, it’s the lending rate which is attracting all developers. LICHFL has lent to developers at an interest rate of around 16%, which is considered reasonably good today, given the fact that India’s largest real estate company DLF, too, has recently borrowed at the same rate from a bank recently.

Meanwhile, LICHFL has increased the collateral for loans from two times, the loan amount to two-and-a-half times. LICHFL, in which 41% is owned by state controlled insurance giant Life Insurance Corporation, lends to home buyers as well as developers.

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October 23, 2010 12:49 PM

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