Cash-rich builders owe lenders Rs 2,000 cr

Realty slump has forced even reputed developers to turn to private lenders; loan amount is believed to have exceeded Rs 2,000 crore despite exorbitant interest rates

Cash-rich builders owe lenders Rs 2,000 cr

Realty slump has forced even reputed developers to turn to private lenders; loan amount is believed to have exceeded Rs 2,000 crore despite exorbitant interest rates
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A SLOW real estate market in the city has forced the usually cash-rich builders to knock on the doors of private lenders to help fulfil their financial commitments.

People in the know say more than half-a-dozen builders of repute have ratcheted up loans to the tune of Rs 2,000 crore at interest rates ranging from 16 to 26 per cent per annum.

"A builder who has several projects in the Powai-Chandivli belt, central suburbs and Navi Mumbai recently had a loan of Rs 400 crore sanctioned from a Lower Parel-based developer.

He got the loan at a relatively low interest rate of 16 per cent per annum because of his name in the market," said a real estate source.

Another builder, who has several projects in South Mumbai, had to go in for a loan worth Rs 1,000 crore.
"The builder owns mill land and has his office located in central Mumbai.

His interest rate is said to be more than 22 per cent per annum," said a real estate broker from the western suburbs.

A builder from Navi Mumbai whose upcoming project got stuck because of liquidity issues also had to opt for a loan.

"The builder, who has projects in Kharghar and surrounding areas, had to take a loan of Rs 50 crore. While the interest rate is not known to me, the builder said he was ready to pay any amount to avoid his name getting tarnished," said a broker from Navi Mumbai.

The slump in the realty market has made banks reluctant to extend loans to builders, forcing them to opt for private lenders despite the exorbitant rates of interest, say experts.

"Sales have hit an all-time low and builders are suddenly finding themselves strapped of cash. With banks turning them away, they have no choice but to get money from private lenders," said an expert.