Last month the Cabinet asked government agencies and public bodies to pay 75 percent of the money to contractors, even in case of a dispute. The move will bring more money into stressed construction sector and help create more jobs. The Cabinet also ruled that whenever there are time-consuming disputes pending between public bodies and construction contractors, these could be shifted to the new arbitration procedure.
Speaking to CNBC-TV18 Deepak Parekh, Chairman of HDFC , said that the recent Cabinet move is an excellent one. “All contracting companies from L&T onwards are overburdened because of arbitration process. Every project goes into arbitration and after that it goes into court. Arbitration takes a long time,” he said.
Even if the arbitration is in favour of the contractors, the government or the state authorities go to the court, he added. The process is so long the banks don’t want to fund them because outstandings are large, he maintained.
“If companies get 75 percent of money, work can go on. There is a huge opportunity for contracting companies.”
He also mentioned how no contracting company has resources because they are overleveraged.
Talking about HDFC, he said one or two loans in housing construction are far stretched. “We have to hand-hold the developer, release small amounts of money which we are doing.”