Debt Refinancing Taking Real Estate In To The Vicious Circle

Debt Refinancing Taking Real Estate In To The Vicious Circle

Real Estate in India has received whooping investment of approximately $10 billion since 2015, the greatest in last seven years, mostly indebted in the form that poses a higher refinancing risk if sale of units in group housing projects will remain slow.

 

“Increase in Real estate is supported by the excessive inflow of capital within the realty sector during the last couple of years. It’s believed that in 2015, about USD 10 billion or Rs 60,000 crore was committed from private equity & FDI which is greatest within the last seven years,” Many of these opportunities came in the form of structured deals and non-convertible debentures (NCD) together believed around $9.5 billion.

 

As reported by India’s top business daily, these investments are largely within the character of loans & financial obligations. FDI equity inflows within the construction development sector happen to be simply to the extent of $81 million between April and October 2015. “Higher level of debt investment, while supplying interim relief towards the sector, poses a higher refinancing risk when the housing sales still remain weak,” says Aashish Palliwal a renowned real estate blogger.

 

The downturn in sales within the housing sector has led to the increase in inventory of lakhs of unsold flats & apartments, mainly in the housing projects in Delhi NCR, northern and western regions.

 

“It’s believed that on the basis of current rate of flats sold per month, the unsold flats in northern region would almost take 65 weeks to be absorbed. The inventory overhang within the western and southern area is way better at 30 and 22 several weeks,” as per the reports published in National daily.

 

Despite weak sales and rising inventory, the prices of flats & apartments in lots of metropolitan areas and cities have elevated in 2015, according to the nation’s Housing Bank s RESIDEX (index of residential prices). In the year 2015, of total 26 metropolitan cities, 20 were seeing rise in prices over 2014, using the maximum increase noticed in Guwahati (9 percent) then Pune (8%), while five saw decline, using the maximum fall observed in Chandigarh (-8%) then Delhi (-4%).

 

Property and possession of dwelling is a vital cause of the Indian economy. It creates significant earnings and employment because of large backward and forward linkages through development of demand within the input industries and property services.

 

The development sector has observed a substantial downturn in last couple of years, with growth rates of .6% this year-13, 4.6% in 2013-14, 4.4% in 2014-15 and three.7% in 2015-16 brought by weakening of both domestic and global growth.

 

 

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