The first quarter of this fiscal will be challenging for the real estate sector. Many prominent players in metropolitan cities have resorted to borrowing funds to meet their loan installments by the end of March 2011. The situation is similarly dire in smaller cities and towns. Realtors who overestimated end-user demand for housing and received advances from buyers and investors are under pressure to deliver promised projects, enabling investors to cash in on their investments.
Financial Challenges
Projects are stalling due to a lack of cash, and banks are cautious about lending money to the sector, especially given the RBI's restrictions on such flows.
Impacts on Investors
Potential investors must be extremely cautious about where they invest. With no real estate regulatory body in place, the old adage of 'buyer beware' is more relevant than ever.
Developer Challenges
Developers are facing a double setback this year:
- Government Support: The timely provision of infrastructure such as power, water, sewage, and road connectivity by government agencies is not happening, rendering completed projects unlivable.
- Financing: The high cost of borrowing and the reluctance of banks to extend credit are driving developers to seek alternative funding sources like private equity, which are more expensive. Additionally, many financiers are more cautious about lending.
Conclusion
The real estate sector is navigating significant financial and regulatory hurdles. These conditions require both investors and developers to exercise prudence and adapt to the changing landscape.