Sky-High Property Prices Deter Buyers, Leaving Developers Struggling
Exorbitant property prices have created a standstill in the real estate market, as potential buyers hesitate to purchase properties. This reluctance has left developers grappling with a surplus of unsold inventory, a scenario they hadn't anticipated.
The repercussions of these inflated prices are far-reaching, impacting developers across the board. They are now burdened with unsold properties, unable to secure buyers. Builders are finding themselves in this predicament, struggling to find any takers for their properties.
Home sales decline as high prices dampen buyer sentiment.
A widespread downturn in home sales is affecting major cities across India. A recent report indicates a staggering 1.4 lakh unsold properties in the National Capital Region (NCR) alone. While the report highlights the NCR, experts suggest this sluggishness pervades other urban markets as well. This decline in home sales has plunged many developers into financial distress, forcing them to rely on debt.
Several developers are currently facing payment defaults, struggling to meet loan interest obligations. Among them is Mantri Realty, a Mumbai-based developer. Mantri Realty has requested SE Investments, a non-banking finance company, to release its Rs. 4 crore fixed deposit to cover the interest on a Rs. 19 crore loan.
Lack of buyers contributes to rising unsold inventory.
As Mantri Realty seeks court intervention for the appointment of an arbitrator, SE Investments has filed a separate suit to prevent the developer from selling approximately 32 apartments, as reported by the Economic Times.
Meanwhile, Mantri Developers has announced a Rs. 1500 crore fund earmarked for five to six residential projects, aiming to develop around 2300 housing units within the next three to four months. However, the group acknowledges that customer bookings and internal accruals won't suffice, necessitating loans of Rs. 300 to Rs. 400 crore from banks.
Anshul Jain, CEO of DTZ India, emphasizes the severe liquidity issues faced by developers. While acknowledging developers' obligation to repay debts, Jain stresses the need for financing companies to provide funding to sustain their operations. "The developers are affected largely by liquidity issues. Admitting that debt has to be paid off by the developers, Mr. Jain said that the financing companies should fund them for running their business."