Concerns like decreasing real estate sales and ever rising interest rates are forcing the real estate companies to shell off their assets to repay their debts. According to a data compiled by Bloomberg show, on December 27 DLF India Ltd., the nations’ largest builder was downgraded by Crisil Ltd., the Indian unit of Standard & Poor’s after its liabilities minus cash increased to an all time high of Rs. 242.7 billion in the three months ended in September.
The risk of defaults has been rising in the Indian real estate industry as the central bank monetary tightening policies have increased the burden over the already overburdened with the slowest economic growth. According to Mr. Kejal Mehta, an analyst at a Mumbai based brokerage Prabhudas Lilladher Pvt. The financial status of the Indian developers may worsen due to slowing cash flows and high levels of debt. Considering the high rates of interest, it is difficult to expect an improvement in the situation.
The amount of debt have been increasing by day due to central bank’s policies due to which the benchmark rate has risen about 3.75% points in the last two years to raise inflation. The central bank repurchase rate is highest right now at 8.5% since 2008. The mortgage rate at HDFC, India’s biggest mortgage lender is 16.5% according to the company’s website.
The risk of defaults has been rising in the Indian real estate industry as the central bank monetary tightening policies have increased the burden over the already overburdened with the slowest economic growth. According to Mr. Kejal Mehta, an analyst at a Mumbai based brokerage Prabhudas Lilladher Pvt. The financial status of the Indian developers may worsen due to slowing cash flows and high levels of debt. Considering the high rates of interest, it is difficult to expect an improvement in the situation.
The amount of debt have been increasing by day due to central bank’s policies due to which the benchmark rate has risen about 3.75% points in the last two years to raise inflation. The central bank repurchase rate is highest right now at 8.5% since 2008. The mortgage rate at HDFC, India’s biggest mortgage lender is 16.5% according to the company’s website.
I guess for this reason only the real estate market has been considered as an unpredictable market. It means that this investment sector is very much flexible regarding the market. If the conditions of the top builders and developers is this then the condition of rest of the developers is well understood. Its not that the loans and interest rates are higher for the common people, but they are even higher for such developers. Due to such reason the developers have to sell their apartments at much lower rate than that of the market rates.
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