As India's real estate sector struggles to raise funds in a liquidity-starved economy, developers abandoning projects is a “scarier situation” which is only “magnifying”, according to Knight Frank India's Gulam Zia.
“Unsold inventory is a concern but when the developer runs away, not just inventory, but homebuyers who have put in their hard-earned money are left behind. The problem is only magnifying,” the executive director at the property consultant told BloombergQuint in an interview on Wednesday.
Hard-earned money of 5-6 lakh buyers in cities such as Delhi, Mumbai and Bengaluru is stuck in unattended projects, Zia said, adding homebuyers cannot depend on courts which take years to pass a verdict. “It is a big mess which is only widening.”
India's real estate developers are struggling to raise funds as lenders turned selective after payment defaults at IL&FS Group subsidiaries triggered a liquidity crunch in September. That, coupled with an economic slowdown, stalled a nascent recovery from the disruption caused by Prime Minister Narendra Modi's cash ban and a stricter housing law that armed homebuyers against frauds.
On Friday, the government announced several measures to revive the economy from a five-year low. That included a recapitalisation of the National Housing Bank and measures to facilitate transmission of rate cuts by the Reserve Bank of India.
The need of the hour, according to Zia, is to address the liquidity crisis where the government needs to relax procedures to facilitate fund flow from banks and non-banking financial companies into the industry.
Also, Zia sought widening of the definition of affordable housing to those with a ticket price of Rs 1 crore from the current Rs 50 lakh. “Expand the definition of affordable housing to save the industry.”
Watch the full interview here:
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