In its annual letter to the mortgage giant’s shareholders, Parekh also suggested relaxing external commercial borrowing rules and immediate regulatory changes to allow end-to-end execution of online home loans.

“Some policy changes will go a long way in supporting housing and housing finance in the future,” Parekh wrote. “The Reserve Bank of India should allow ad hoc restructuring of mortgage loans. This is a long-standing demand and a measure implemented in the past to revive the sector.

“If developers have no cash flow due to slow sales or a delay in receiving required construction approvals, they cannot complete existing projects or honor their loans,” noted Parekh. “Even if a lender is willing to help the project remain viable, any change in loan terms, including additional financing, is considered a non-performing loan by applicable regulatory standards.”

These are unusual times and a pragmatic approach is needed to resolve financial stress in the real estate industry without bailouts, he said. Letting the problem escalate can lead to an increase in non-performing loans, which in turn will weaken the entire financial sector, Parekh said.

He also called for making real estate prices realistic to reflect current market realities, saying it would help developers offload their unsold inventory and improve their cash flow.

Simultaneously, there is also a need to realign loan calculation rates, he said. Parekh also praised the RBI for taking on a huge burden to maintain financial stability.

“The saga of the highest court questioning the RBI about the moratorium was indeed unfortunate. Why should a central bank be accountable to a court of law for the basic principles on which the financial sector operates? He observed.

The industry veteran said interest payments on borrowings and loans are contractual obligations and when no laws are broken, all efforts at this point should be directed towards economic recovery rather than engage in legal disputes.

“These issues need to be resolved smoothly and I remain hopeful that the authorities will find solutions to protect its stakeholders,” he said.

Parekh said the global economy has never seen demand and supply evaporate simultaneously and the pandemic has exposed the fragility of health systems and the lack of social safety nets around the world.

At the same time, containment has increased the value of the essentials of life – food, clothing, shelter, and now, the internet.

“There can be no better security in life than a home… HDFC is in the right company and we’ve been doing business the right way. There may be delays in terms of healing time, but we remain convinced that the inherent demand for housing is intact, ”he said.

Parekh said that FY20 has seen HDFC perform well, but it was by no means an easy year.

“Loan risk aversion increased, further choking credit where it was needed most… We also had our share of disappointments,” he wrote. “These were about some long-standing relationships that we thought we could trust. When hardship befell them, the legal system took precedence over our recovery efforts. “

He said recovery efforts will continue unabated. “In the most difficult times, recent resolutions in our favor have been encouraging, raising hopes for a changing tide.”

Parekh further said that a scenario is emerging in which there could be inorganic opportunities for the HDFC group companies and some of its subsidiaries will need additional capital for their expansion plans.

“We have also identified new investment opportunities that will help build the next generation of HDFC value creators. To support this, we are putting in place a roadmap for our future capital needs, ”he said.

Parekh said the woes of the Indian economy predated the pandemic and pushed for solutions that do not encroach on limited government resources given the immense constraints on fiscal finances.

He said the government has rightly recognized the benefits of encouraging housing, given that the construction sector is the second largest generator of jobs and has multiplier effects through its backward and forward linkages. with other industries.

Parekh also supported regulatory changes to make it easier to execute end-to-end mortgages online.

“Currently, loans are approved online, but disbursements cannot take place because electronic signatures on mortgage documents or agreements relating to real estate are excluded from the scope of the 2000 Law on Real Estate Technology. ‘information. “

“With the immense push on technology in the financial sector, this amendment can easily be facilitated by an ordinance,” he said.


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