Higher provisioning norms for commercial property would adversely affect the real estate sector: MCHI

Higher provisioning norms for commercial property would adversely affect the real estate sector: MCHI
Mumbai: Maharashtra Chamber of Housing Industry (MCHI) has expressed its concern on the Reserve Bank of India (RBI) announcement to revise the provisioning norms from 0.40 to 1 per cent for loans to the commercial real estate sector, as the commercial property construction and IT/ITes spaces have just started signs of revival after a long lull.
Commenting on the RBI’s move, MCHI Secretary Mr. Mayur Shah said, “RBI’s move could be detrimental at the time when the commercial and IT construction have just started to move up after a long interval. Though, the impact of the RBI move would be marginal for the developers who enjoy good credit rating, it would give negative signals to the industry as a whole. It would also push up the cost of the commercial construction and escalate the prices further.
Mr. Shah, who is also the Managing Director of the Marathon Group further, said, “We the members of the MCHI urge the central bank to reconsider the proposed move, in the overall interest of the industry. To achieve the economic growth, we will need world class commercial/IT spaces and retail spaces, so discouraging the development of commercial real estate shall be detrimental to overall economic growth. Also, Banks are only funding for the construction finance and not land acquisition so asset bubble fear is out of place at this time”.