The realty sector had not completely recovered from the twin blows of GST and demonetisation when the IL&FS saga unfolded this September, choking fund flows to non-banking finance firms (NBFC) and housing finance companies (HFC). NBFCs with builder loan exposure were punished severely on the bourses, while some HFCs managed to raise funds through bond issuances. But, fund flow to the construction sector still faces hurdles, with the limited steps taken by the Reserve Bank of India (RBI) not yet resonating at the ground level.
This could result in many projects sliding into the “stressed” category in the National Capital Region (NCR), fear observers. Not only builder loans, in some segments, housing loan disbursements have also slowed, leading to pressure on an already burgeoning inventory. To add to woes, September quarter residential sales dropped 12 per cent in the region while festive season offtake remained tepid.
“It seems the worst is not over yet. Banks were already cautious… and the NBFC crisis has caused fresh trouble as a majority of lending was happening through NBFCs. I think the crisis is going to continue till 2019 and will have an impact on fresh launches and completion of projects,” said Anuj Puri, chairman of ANAROCK property consultants.
According to experts, there are a total 2.50 lakh units stuck in NCR that were launched in 2013 or earlier, of which 1.3 lakh are in Noida and Greater Noida alone. Developers now claim that this may rise to 3 lakh by year-end if there is no timely intervention, with unsold inventory already at 2.24 lakh as of October-end.
“This will impact consumers and developers both,” a leading developer and member of the Confederation of Real Estate Developers’ Associations of India (CREDAI) said.
“NBFCs were a big window for developers but that source has also dried up... Lending for commercial real estate has already contracted and if the situation goes on like this, many residential properties will be impacted,” noted Geetamber Anand, chairman, CREDAI and CMD, ATS Infrastructure.
A CREDAI delegation met finance ministry officials last week demanding a separate “stressed assets fund” for unfinished housing projects. This, they say, is the only way out for projects stuck for want of money. While finance ministry officials say they will take up the issue with the RBI at its next board meeting on December 10, the urban development ministry has also joined the issue, having written a letter to the finance ministry, cautioning that the liquidity crunch may derail Prime Minister Narendra Modi’s pet project ‘Housing for All’.
