The rate at which economy is growing our urban centers shall add at least 100 million people by year 2020 merely on the account of urbanization. To provide housing to so many people India needs to invest a trillion dollars over the next 10 years. This is equivalent to 80 times our education budget allocation for year 2011-12. While in the short-term there are concerns related to over-supply in certain markets the long-term outlook on an aggregate level is positive from institutional perspective.

Valuations is always a concern in a growing economy, India is no different. It becomes difficult to reach a common ground where interests of both investor and seller are aligned. The current environment presents a good opportunity for PE players to get in a deal on reasonable terms. Most of the investments are happening at a project level rather than entity level where PE players are able to secure their investment while eyeing above normal returns.

Finally sentiments for real estate are exemplified by the preference given to it as an asset class which corners more than 50% of the investment bucket of an average Indian national. Current tepidness is a short term down cycle which the sector will come out of as global conditions improve. Larger problems with the sector are in fact related to serious land title issues, long approval cycle, use of malpractices in execution and lack of financial depth in financial intermediaries which need considerable public-private participation to address comprehensively.

Private equity with long term capital is allowing developers to withstand short term cash flow pressures. Despite this being a much more expensive capital than any form of debt, developers accede to it as it allows them to scale up, build professionalism, obtain sophisticated advice and enter new markets. Many a time association of a PE player with a project also adds to the marketability as customer is assured of the financial discipline and corporate governance standards demanded by such financial institutions.

As we look at it, this is a symbiotic relationship which developers have started to appreciate due to reasons other than capital. On the whole it works to the final customer’s advantage who is assured of his investment and product quality, the benefit of which accrues to the project’s bottomline.

As banks struggle to come to terms with the new situation, what is slowly emerging is the realization that a new paradigm is required for banks’ engagement in the real estate sector. Banks can no longer act simply as lenders managing a loan portfolio. Increasingly they are becoming equity owners, in legal reality or merely de facto, and in future they may need to behave as such so safeguard their investment.

Banks should now be accessing asset management specialists to run their investments actively as real estate portfolios. They should engage with complex strategies of ownership changes, restructuring, dept-equity swaps and the like.

Banks are now at the top table in the real estate business. With substantial equity injections now being made in the real estate sector, values may be driven lower before returns can be rebuilt. And for the foreseeable future, many banks may have to act as engaged and committed property investors.

The bank will showcase a bouquet of home loan products . Around 60 real estate developers /builders and auto dealers will participate in the utsav. The bank is offering a 0.25% concession in interest rate from the fourth year of the home loan if it is availed at the SBI Utsav.

Soundara Kumar, chief general manager (Karnataka) of SBI, said the bank was looking to generate a business of Rs 550-600 crore from the three day event. “We expect the ticket size of home loans to be in the order of Rs 20-25 lakh. IT professionals and people employed with public sector companies will drive the demand for home loans,” she said.

Those buying flats in real estate projects for which SBI has extended loans can avail home loans in four days. The Utsav is open from 4pm to 7pm on Friday and 11am to 7pm on Saturday and Sunday.

The credit lenders are reluctant to provide loans to contractors, mainly because they are afraid that there is no continuity of work. Without this continuity there is a risk that the client will default on the repayment and therefore their money will be at risk. There are some financial institutions who are willing to provide mortgages for contractors, but they can charge comparatively high rates of interest. These high standards and rates of interest prescribed for credit loan facilities put a big burden on contractors when it comes to finding finance. Even though the fact is that many self employed workers earn more money than some employed workers.

The main hurdles faced by the self employed when applying for credit is proving how much they earn. They also find it difficult to provide guarantees to prove that they will continue to receive this money in the future, which would obviously reduce the repayment risk. In order to avail mortgages for contractors, you first need to prove your employability, that is, the present work you are performing. They will also assess you on the basis of your past performance.

The bank or financial institution will assess your market reputation and the profile features of your clients, also your earning potential and your credit worthiness. These are all related to the future and have a certain level of uncertainty. Some banks do tend to exploit these problems and will offer mortgages but with much higher fees and processing charges, therefore compelling the borrower to pay very high rates of interest. The lending institutions justify this injustice on the basis of the risk involved in the repayment by the service providers. Hence special and difficult criteria are provided for mortgages for contractors.

But now the situation has changed and many lending institutions are coming forward to offer finance for contractors on a reasonable and standard rate of interest without spending much on processing fees. They have made the procedure much simpler so that there is no need to produce company accounts, or to take out overpriced loans in order to pay your mortgage.