REAL ESTATE UNDER STRESS
The frequent cases of builders across the country taking a drastic step of ending their life time and again brings to light the pressure piling up on the sector.
TEXT: SAPNA SRIVASTAVA
In a press note few days back Nayan Shah, President, CREDAI-MCHI expressing his thoughts on rising incidences of builders committing suicide stated, “Most of the builders are under tremendous stress. Such tragic incidents have been happening again and again since last 3-4 years. And unless some major steps are taken we are seeing a difficult road ahead.”
Rajan Bandelkar, President, Maharashtra unit of NAREDCO said in a statement, “There is a stress in the real estate sector as developers are not able to access funds.” According to the market reports, almost 90 per cent of the builders are unable to cope with the stringent financial compliances under RERA. In addition, the banking & NBFC crisis has left them high and dry, devoid of finding avenues. One of the developers stated, that the tough liquidity crunch and rising NPAs have made financial institutions deny funding even when the same had been approved earlier. The builders based on the approval letter went on to make financial commitments and now have been left in lurch.
The panacea to some extent may lie in real estate funds/ PEs taking over stressed assets and bigger developers taking over the projects of cash starved developers.
Navin M Raheja, CMD, Raheja Developers Ltd in a telephonic conversation asserted that the government should create a stress fund to bailout the distressed projects. This would be in favor of both the consumers as well as the realty sector.
Poor sales, unsold inventories and paucity of funds are the major factors creating distress in the industry. While, some blame the developers for their wrong investment and product strategies for their problems, others believe that government should not be held responsible for the wrong decisions of the builders.
CRITICAL FACTORS THAT DEMAND URGENT ATTENTION
- There are over five lakh home buyers whose hard earned life savings are stuck in different real estate projects across the country.
- Real estate is the second largest employment generator and a slump in the sector would result in high unemployment rates.
- Various allied industries are dependent on real estate and construction segment and collapse of this sector will have a cascading effect on other sectors.