The slowdown in the Realty Industry is palpable.
Month after month, reports on the booking have shown double digit drops.
In the hey days in the not too recent past, builders have rushed to launch new project after project.
Much of the funds came from pre-sales order bookings by speculators. The remaining came in from banks and other Financial institutions. As genuine home seekers came in the bank loans were paid off.
However a number of dubious builders, many among the leading ones – invested the income received, into purchasing more and more land rather than finishing off the present projects under constructions
Now with India’s Realty slowdown a reality and with rising interest rates, these developers have large land banks but stuck with huge debts and unable to raise capital so badly needed to complete the projects started off.
So are the builders really worried?? Interestingly they are not.
Analysts say developers are not taking steps to remedy the current situation because they don’t have to face any serious consequences for the delays.
While some of agreements with those who have booked flats have a penalty of typically 1% for not delivering their apartments on time, many don’t even have a proper penalty clause included.
On the other hand, Bank charge developers between 16% to 18% interest rate on bank loans,
Hence developers would rather settle for the measly 1% to be deducted from the salesprice to the buyer, rather than take loans from banks to complete their projects.
Till new sales start coming in again, it makes more economical sense that they would rather stop construction and wait it out !
“There is no sense of urgency” among the developers, Around 40% of the projects surveyed in the Mumbai region are behind their January timetable schedule.
With no strong regulator in this industry... well its almost holiday time for the developer.
On the other hand, buyers who have booked flats are now rueing the day, paying at 8-10% on their home loans with no “home in sight”
Month after month, reports on the booking have shown double digit drops.
In the hey days in the not too recent past, builders have rushed to launch new project after project.
Much of the funds came from pre-sales order bookings by speculators. The remaining came in from banks and other Financial institutions. As genuine home seekers came in the bank loans were paid off.
However a number of dubious builders, many among the leading ones – invested the income received, into purchasing more and more land rather than finishing off the present projects under constructions
Now with India’s Realty slowdown a reality and with rising interest rates, these developers have large land banks but stuck with huge debts and unable to raise capital so badly needed to complete the projects started off.
So are the builders really worried?? Interestingly they are not.
Analysts say developers are not taking steps to remedy the current situation because they don’t have to face any serious consequences for the delays.
While some of agreements with those who have booked flats have a penalty of typically 1% for not delivering their apartments on time, many don’t even have a proper penalty clause included.
On the other hand, Bank charge developers between 16% to 18% interest rate on bank loans,
Hence developers would rather settle for the measly 1% to be deducted from the salesprice to the buyer, rather than take loans from banks to complete their projects.
Till new sales start coming in again, it makes more economical sense that they would rather stop construction and wait it out !
“There is no sense of urgency” among the developers, Around 40% of the projects surveyed in the Mumbai region are behind their January timetable schedule.
With no strong regulator in this industry... well its almost holiday time for the developer.
On the other hand, buyers who have booked flats are now rueing the day, paying at 8-10% on their home loans with no “home in sight”