In a move that could give a further fillip to the economic reforms kickstarted by the Centre last week, the government has now told commercial banks to fund partially completed residential projects, as well as projects in small towns on a priority basis.

At a meeting between the secretary for financial services, DK Mittal, Indian Bankers Association (IBA) and developers? apex body Confederation of Real Estate Developers? Associations of India (Credai) in Mumbai, Mittal asked commercial banks to focus on funding under construction projects that are delayed due to want of funds, said Credai president Lalit Kumar Jain. The meeting was called to understand the issues of the housing sector and the problems being faced by developers in terms of funding the projects. Apart from SBI, leading bankers like HDFC, National Housing Bank and Bank of Baroda attended the meeting.

Mittal has also asked the realty industry to conduct a survey of unsold housing stock in cities in batches so that the banks have a clear idea of how much funds are required and what will be the future demand for capital. ?Earlier this month, the honourable finance minister had said that there are 5 lakh units lying unsold in the country, but that number is highly inflated,? Jain said.

?Credai has found that this number is so high because there is a disconnect between what a developer ultimately plans to deliver and the units he actually starts off building,? he said. He explained that a developer may announce 7,000-8,000 units if he is planning a township, but he starts with 400-500 units, the calculations take the ultimate number into account which make the calculations go awry. To get a proper mechanism to calculate actual unsold stock in the country, Credai is in the midst of finalising a third party agency which will carry out this survey on its behalf, Jain said.

According to Jain, bankers have insisted that in metro cities, the developers should have one lead banker for funding, and there should be a norm of one-project one-bank and opening escrow accounts.

They also suggested incentivising the rated projects through lower rate of interest. Jain said apart from the funding issues, bankers conceded that factors like project approval delays, limitation on land availability for real estate and even the floor space index restrictions should be addressed for the development of the housing sector.