SBI denies funding to realty projects in disputed areas

Source :BS:Press Trust of India / New Delhi July 8, 2011, 19:27 IST

Adopting a cautious approach in the wake of Supreme Court asking the U P government to return land to original owners, country's largest lender SBI today said it will not finance real estate projects which are mired in disputes over acquisition of land.

"...If in a particular area where there has been a difficulty, those will not be financed," State Bank of India (SBI) Chairman Pratip Chaudhuri told reporters on the sidelines of banking sector review conference presided over by Finance Minister Pranab Mukherjee.

His remarks come two days after the Supreme Court asked the U P government to return the land acquired in Greater Nodia for realty projects. Also, the number of disputes over land acquisition has been steadily rising.

"How can we give a loan when there is no land, where there are no land rights," Chaudhuri said when asked about the bank's position with regard to funding of projects in disputed areas.

"Due diligence is very necessary while advancing credit to commercial real estate sector as high interest regime is pushing up project costs and hence greater chances of default," National Housing Bank CMD R V Verma said.

The Reserve Bank has already asked banks to be cautious while extending loans to commercial real estate projects, in view of increasing bad assets.

Land acquisition has become a a major issue with farmers across the country, West Bengal and Orissa to cite two examples, often vehemently protesting acquisition of their land for industrial purposes.

On Wednesday, the Supreme Court had upheld the Allahabad High Court order quashing the acquisition of over 156 hectares of land from farmers in Greater Noida by the Greater Noida Industrial Development Authority (GNIDA) and its allotment to builders.

About 6,000 people who had booked flats in residential complexes being built by realty firms like Amrapali at Greater Noida will be affected by the Supreme Court's order.

But an apex body of the realtors had assured that the affected flat owners will either be moved into other projects or their money will be returned.