Indian real estate lending only if BIS standards followed
The Reserve Bank of India (RBI), India's central bank, has asked banks to include the national building code of the Bureau of Indian Standards into their loan policies. The BIS building code seeks to guide construction activities within the country to desired standards.
The code contains relevant guidelines for the safe and orderly development of buildings including administrative regulations, development control rules, general building requirements, fire safety requirements, materials stipulations, structural design and construction and building and plumbing services.
The RBI directive will lead to lenders applying pressure on builders and developers to follow the BIS code. RBI has already enforced a directive that project lending can be provided only for projects that have all necessary permissions. This move prevents lending for speculative activities such as land purchase.
Lending to the ‘sensitive’ real estate sector is getting more and more cumbersome. First banks were told they can lend to a real estate developer only after a project has received all the necessary permissions, including those from local authorities, which effectively bans providing loans for buying land.
As widely expected, the mushrooming real estate sector in India is likely to see an increasing number of regulations that influence its development. The RBI move is one such move that could lead to higher standards of construction in the country.
By INRnews Correspondent
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