Collaborative, multi-layered approach from developers to manage stressed realty in long run
Ashish Sarin, CEO, AlphaCorp
The somber hue of the global pandemic over India’s realty sector is now fading away. Developers with a proven track record are leveraging innovative and best-in-class methods to put the realty market back on track. The sector is fast recovering, and the stakeholders want to leave no stones unturned to safeguard it from future market upheavals. This revamped approach has again brought focus of developers on stressed projects. As per market estimates, there are over 4,50,000 stressed units in the country which are either stuck due to financial hurdles or facing litigation-related challenges.
Today, developers are jointly coming forward to invigorate the segment through collaborative and multi-layered approach, and also to pull it out of dungeon of stressed assets with estimated value of $65-70 billion.
The current plight of stressed projects was not caused by an overnight phenomenon. Various factors including NBFC crisis, aggravated the situation and made it tough for developers to secure funding. To address this grave crisis, government announced various policy measures and stimulus packages to support financing, but joint efforts and participation from private players are crucial at this juncture to manage stressed real estate.
Over the years, tried and tested methods have propelled developers to opt for multi-layered approach to inject more liquidity in this segment, contemplate new avenues to bridge funding gap, mobilize investments via private equity players, NBFCs, venture capitals firms, HNIs, commercial investors.
The policymakers, developers,consultants and investors should also function in-sync to cut burden of stuck inventories accumulated over years, by completing and selling projects at a rapid rate.
Around 60-70% of stressed projects just require recapitalization or last-mile funding to get back on track. The visible change can be brought through consolidated efforts of various realty players and the trend has already begun.
Developers struggling to finish stalled projects and looking for viable means to overcome distress, are now converting stress into opportunities. They are now devising easy credit options and need-based funding for projects which are nearing completion and are saleable. Established developers are now taking over incomplete projects and are ensuring timely delivery. This is reducing the burden of developers in financial troubles and opening new vistas for business opportunities for forward-looking developers.
It is pertinent to mention that raising funds on its own is not cakewalk for real estate developer. Thus, securing funding from other investors or raising it with the help of Alternative Investment Funds or AIF can bring huge respite for them while also offering them a viable exit. After completion, the projects can be sold off easily which can immensely benefit the overall cash flow.
The boost in market sentiments in a post-pandemic phase has made leading developers explore collaborations to help cash-starved developers.
Predicting stressed opportunities in slow property market, new set of realtors are also eyeing joint ventures. The positive trend today is such that cash starved developers have started turning to financially-sound builders for completion of stalled projects.
A joint venture also allows established developers to fine-tune their project delivery capabilities and instils confidence in skeptical investors / home buyers with their brand reputation.
The collaborations are good medium to find synergies between partners, as also to support distressed or struggling projects which encompass growth potentials. Through such partnerships, financial tools are effectively managed bringing in huge relief for many who are stuck with such stressed assets.
Similarly, from an investor’s point of view, they too can make easy purchases with clear exit visibility coupled with safe and sound returns in the future.