HDFC Chairman warns against developers’ too-good-to-be-true offers

HDFC Chairman warns against developers’ too-good-to-be-true offersHDFC Chairman Deepak Parekh on Friday raised concerns over aggressive lending to real estate developers and cautioned home buyers against property developers' `too-good-to-be-true' offers.

Mr. Parekh also warned home buyers against schemes where property developers claim of paying interest on the borrowers' loans. He said that borrowers must not believe that developers' offers to pay interest on a borrower's loan for a specified period would be without a risk.

Speaking on the topic, he said, "Borrowers have to be cautious because in the event of a developer delaying payment, the credit bureau reports will reflect this in the borrower's records, thereby impacting his or her credit worthiness."

He lauded the growth in India's home finance market, but suggested that the financing firms should stay away from innovative and aggressive loans to property developers.

He also warned financing firms against lending money to developers at the same rate of interest as being offered on individual home loans. He noted that construction finance entails higher risks and, thus, such risks should be built into the pricing.

The warnings loan industry veteran Mr. Parekh emerged as the Reserve Bank of India (RBI) has relaxed risk weightage on loans granted to commercial real estate for housing.