In a clear indication of banks pulling out their hand in the aftermath of the Supreme Court ruling in the Greater Noida land acquisition case, State Bank of India on Friday said it would not finance real estate projects that were mired in disputes over land acquisition. “If in a particular area where there has been a difficulty, those will not be financed,'' bank Chairman Pratip Chaudhuri told reporters on the sidelines of a conference here.
Mr. Chaudhri's remarks come two days after the Supreme Court asked the U.P. Government to return the land acquired in Greater Nodia for realty projects. “How can we give a loan when there is no land, where there are no land rights,'' Mr. Chaudhuri said when asked about the bank's position on funding projects in disputed areas.
“Due diligence is important while advancing credit to the commercial real estate sector as the high interest regime is pushing up project costs and hence greater chances of default,'' National Housing Bank Chairman and Managing Director R. V. Verma said.
The Reserve Bank of India has already asked banks to be cautious while extending loans to commercial real estate projects in view of increasing bad assets. On Wednesday, the Supreme Court had upheld the Allahabad High Court order quashing the acquisition of over 156 hectares from farmers in Greater Noida by the Greater Noida Industrial Development Authority and its allotment to builders.