The Union government’s initiative to set up an alternate investment fund (AIF) for the real estate sector is commendable, said Gagan Banga, vice-chairman and managing director Indiabulls Housing Finance in an interview with CNBC-TV18.
“It’s an idea which has been floating around for quite a long time getting into implementation mode. It may take a few months for a fund to get set up and the money to start flowing but directionally both lenders and developers know that the government is thinking about how to de-clog the whole real estate sector,” he said.
Banga added: “Both financially as well as sentimentally it’s a very positive development though the outcome of this would be more visible in probably the fourth quarter of the financial year.”
Talking about Indiabulls Housing Finance’s second quarter numbers , he said: “The developer book has some stress which we have been proactively recognising, we have been proactively providing and we will continue to do so, but on an overall basis our gross NPA [non-performing asset] on absolute value has declined QoQ [quarter-on-quarter]. Our net NPA on both value as well as percentage basis has declined.
“However, while I am not for a moment suggesting that the stress in the real estate sector has gone. All I am saying is that we are on top and our pre-provisioning operating profits, along with the other buffers that we carry, have put us in a position that whatever be the situation we should be able to handle it as we have handled the last 13 months.”
He added that that third and fourth quarters will be for rebalancing of the books when the company will become even more dominant towards retail asset class.
On fund raising, Banga said: “The rating agencies have downgraded us from AAA to AA+ with a negative outlook. There is no rating on watch.
“Given the overall shallow nature of bond markets, one of the biggest learnings for the management is that wholesale financed business in India should shy away from the bond markets because the debt capital market in India are just not mature enough.
“A large part of the debt markets are still controlled by treasuries which are lot more whimsical and structurally we do not have a swap market. So the ability of bonds to recover their correct price with low credit default swap (CDS) becomes extremely difficult. So in that context strategically at least for the next 2-3 years till the time all of these instruments do not come around, you are going to find Indiabulls housing largely absent from the bond market,” he added.