Allow one-time restructuring of real estate loans to complete stuck projects: Keki Mistry, HDFC

If loan restructuring is allowed, then new lenders will come and provide funding for a project with proper diligence, proper safeguards while ring-fencing the money. If that is done, then these projects can get completed and home buyers can get their apartments, says Keki Mistry, CEO, HDFC.

On corporate governance concerns and Sebí’s efforts
First of all, Sebi has done a fantastic job on corporate governance. Sebi has really done extremely well in terms of the control that they have brought into the system so hats off congratulations to them. I think it is just a question of transition, it is a new world, it is a new future that we have to get used to. Companies will have to adjust their thinking. We are becoming much more global. So much global money is coming into the country that we have to follow global standards.

It is just that temporarily a sense of risk averseness has set in and that is the only thing that needs to get addressed. People have to be willing to take on a little more risk because that is the best way in which lending can flourish in the banking system and also investments.

Genuine or not, how do companies deal with corporate governance concerns and whistle-blowers’ complaints? How to build trust among the shareholders?
Trust is very important and it is very critical. Otherwise, it is very difficult to explain why some companies are trading at 60 times PE ratio and other companies are trading at four times and five times PE ratio. Trust is something which gets built over a period of time.

Trust is doing something where even if whistle-blowers’complaints get reported on the first page of the newspaper the next day, you will not feel ashamed of it. That is what integrity and trust is all about. That is something every company should aspire to and aim at.

On realty norms announced by RBI and the Finance minister during the budget. Any clarification on rules that are applicable to HFCs?
That has always been the case in the NHB guidelines. It is nothing new. Now, it has been brought in for banks. It was always in existence for housing finance companies.

Now with the relief announced, do you finally see the issues that are going on with the realty industry coming to an end?
Break the real estate industry into two categories -- the commercial and residential. The residential segment is under some stress in the high end market. In the affordable housing market, the growth is good and everything is fine. There is no oversupply. It is only the high end markets of Mumbai and Delhi and Bangalore and places like that, which are showing some stress.

The commercial part of the real estate business is also doing extremely well. So it is really the high end Mumbai, Delhi, Bangalore market which is showing some stress. The only real problem is the number of stuck projects. Many projects are stuck all over the country and we have to find a way of resolving this issue.

Unless this issue is resolved I do not know how the problem can be solved. There are hundreds and thousands of home buyers who bought apartments in these projects which are not getting completed. Now they are not getting completed for a number of valid reasons it is not because of misappropriation of money or frauds or anything of that sort. It may be so in a few cases but in the majority of cases, it is just that costs have gone up, sales have not taken place the way they should have and therefore developers are running short of money.

We have to find a solution where money is made available to these projects so that these projects get completed. The only way that money would be available is if you permit a one-time restructuring of real estate loans. If that is allowed, then new lenders will come and provide funding for a project with proper diligence, proper safeguards and ring-fencing the money. If that is done, then these projects can get completed and home buyers can get their apartments.