Diwali is an auspicious time for people to buy property. But this year rising interest rates, unjustifiably high real estate prices, rising inflation, the stock market crash, a slowdown in the economy, salary cuts, lay-offs, the global credit crunch, and a general fear of worse financial times to follow have hurt India’s realty sector like never before.
Home-loan interest rates have skyrocketed and people are tightening their purse strings to ride the financial tsunami that has reached Indian shores. The real estate sector, say industry sources, has been witnessing a major slump in business since quite a while now, but builders with deep pockets have managed to hold off the challenge till now.
Having overshot their budgets due to rising costs of construction material led to prices of apartments rising, but with potential buyers having vanished and lenders breathing down the builders’ necks to get back their money, the Indian real estate sector is headed for a BIG downturn.
Banks and financial institutions who have been a major driving force in India’s real estate boom now want their money back.
Having lent huge funds to builders and other real estate firms, these lenders now want the builders to make their interest payments against the loans. With barely anyone buying property in these lean times, banks fear that these builders and real estate firms might default on their payments. Thus pressure is being brought to bear upon these firms by lenders who are suggesting to builders to drop prices and woo the buyers back into the market.
A recent report in the Economic Times said that the lenders are telling builders to?sell-before-it’s-too-late’. The report said that banks and institutions have lent over Rs 75, 000 crore(Rs 750 billion) to Indian builders, not including the Rs 25, 000 crore(Rs 250 billion) worth of bonds and debt papers which mutual funds had bought. Lender fear that if big builders start defaulting, the result will be a knockout punch for the lenders.
Rumours that a big real estate firm had defaulted on interest payment has further set the cat among the pigeons.
However, with the Reserve Bank of India slashing key interest rates in the last fortnight in light of the global financial crisis, consumers feel that things might ease for them and they might be able to afford that dream home. Lender fear that if big builders start defaulting, the result will be a knockout punch for the lenders.
Rumours that a big real estate firm had defaulted on interest payment has further set the cat among the pigeons.
However, with the Reserve Bank of India slashing key interest rates in the last fortnight in light of the global financial crisis, consumers feel that things might ease for them and they might be able to afford that dream home. Lender fear that if big builders start defaulting, the result will be a knockout punch for the lenders.
Rumours that a big real estate firm had defaulted on interest payment has further set the cat among the pigeons.
However, with the Reserve Bank of India slashing key interest rates in the last fortnight in light of the global financial crisis, consumers feel that things might ease for them and they might be able to afford that dream home.
Friends, what I intend to say is that be cautious while making a decision and if possible defer till some normalcy is restored back in the financial market.