The ongoing liquidity crisis in NBFCs has ra t tled realty sect or as this co uld hit fund infl o ws to developers as well as ho mebuyers, and lead to slo wdown in housing dema nd-supply, according to a report.
The ongoing liquidity crisis in NBFCs has ra??t?tled realty sect?or as this co?uld hit fund infl?o?ws to developers as well as ho?mebuyers, and lead to slo?wdown in housing dema?nd-supply, according to a report.
The real estate industry mi?ght also witness consolid??a???tion because of liquidity cr??u?nch, said real estate cons?u?l?t?ant Anarock in a report on Thursday. The NBFC sector is under crisis since last month when it came to light that IL&FS group defaulted on short-term loans.
“The ongoing NBFC cris?is has, for all intents and pu?r??poses, hijacked Indian real estate’s growth story over the short to mid-term. It will not only freeze funds to the real estate sector but also impact private equity (PE) funds fl?o?wing into the sector,” An?ar?o?ck chairman Anuj Puri said in a report. PE players would become cautious in le?n?ding to developers and pref?er last-mile funding, meani?ng for projects nearing comp?l?etion. “In the short term, funding for greenfield proje?c?ts will cease to exist. This w??i?ll inevitably impact new la?unches across cities,” he said.
As a result of this crisis, Puri said home loan interest rates would see a slight rise in the near future.
NBFCs would be a lot mo?re cautious about disb?u?r?s?ing loans till the market ret?u?rns to normalcy and this co?uld put an upward press?u?re on home loan rates. Banks as well as NBFCs could also tighten their norms around home loan disbursements to individual homebuyers.
The absence or scarcity of home loans to homebuyer could exacerbate the already protracted slowdown in residential demand in the short to mid-term, he said.
“All in all, the NBFC crisis has rattled the real estate ind?u?stry to the core – much m?o????re than the disruptions that recent policy implem?e?n?ta?t?i?o?ns brought on – and now co???nsolidations will gal?o?re. Only the fittest will survi?ve this perfect storm,” Puri said. Puri also cautioned th?at if the current NBFC crisis do not get resolved soon, the much-anticipated recovery of the real estate sector mi?ght get prolonged by a couple of quarters.
On the housing market, Anarock said both sales and new supply are gradually pi?c?king up across the top se?v?en Indian cities – Bangalore, National Capital Region, Mu?mbai Metropolitan Reg?i?on, Chennai, Kol?kata, Pune and Hyderabad.
The new launch supp?ly across t?he top sev?en cities in first three quart?e?rs of 2018 st?o?od at nearly 1,39,700 units, increasing by nearly 18 per cent against the corresponding period in 2017.
Housing sales have also witnessed a jump of nearly 8 per cent in the first three quarters of 2018 as against the same period in 2017.
Meanwhile, the ap?ex association of re?al estate develo?p?ers on Th?ur?s?day sent an SOS to the prime minist?er’s office sa?y?ing housi?ng and other pr??ojects were fa?c?ing an acute liqu?i?dity crisis after financ?ial institutions stopped disbursing sanctioned loan am?o?unts to builders. In its letter to the PMO, the Confederat?i?on of Real Estate Develope?rs’ Associations of India (C?R??EDAI) has demanded a on?e-time restructuring of ba???????nk loans and creation of a ‘stressed asset fund’ for comp??letion of realty proje?c?ts.
It sought prime minister Narendra Modi's interventi?on “to ease the credit freeze in the Indian real estate sect?or amidst the lack of availa?b?ility of funds to developers for completion of real estate projects.” The crisis in the NB??FC space came to light last month after IL&FS defa?u??l?ted on some debt repaym?e?nts. “At a time when develo?p?ers are under immense pr?es?sure to deliver projects on time, financial institutions are cancelling disburseme?n?ts after the loans have been sanctioned – leading to the non-adherence of timelines specified to homebuyers,” CREDAI said in a statement.
The association said the real estate sector is expected to be a beneficiary of multiple reforms, foremost being the Real Estate Regulation and Development Act (RERA) and GST, but currently it is “trapped in a downward spiral of unfinished projects and tapering off of demand.”