For a long time, the Public Sector banks have been a support for the developers without any discrimination, in terms of providing capital. But situations have changed at present with increased monitoring of RBI. Its determined attempt to clear the NPA mess with the help of policy restrictions one after another, turns out to be a weak spot for the residential developers.
Traditionally, the public sector banks use to provide capital to the realty sector. And it is for this reason, the industry did not take much time time to recover after the Global Financial Crisis of 2009. But the strict monitoring of RBI, has caused the banks to tightly examine the fresh loan proposals that come their way. Such was not the scenario in the past when the banks gave out loans for projects based on highly unrealistic reports.
Expensive capital from NBFCs has replaced it cheaper counterpart from banks thereby, causing the balance sheets of the developers to stress out further. And more so, due to the sluggishness of sales velocity over the recent few years. Developers who are not fit for being funded by the sources of institutional capital such as NBFCs, are becoming subject to insolvency.
The waking up of consumers to securing their rights regarding timely possession of property, is one of the major drives that need a mention. Years of deception by the developers to promise a certain time of delivery and not fulfill it at the end, have resulted in the rustration of buyers. Now, that the Government has made serious efforts to protect the consumers’ interests, improvement of the realty sector is confirmed. Steps taken in the recent times against prominent developers, bear enough evidence.
Besides, the introduction of indirect and direct tax laws, has also impacted the Real Estate sector, which is about to last long. The journey in between might make the upcoming years tougher for the industry but is definitely worth the new sunshine of high clarity in the country’s Real Estate sector.
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