Booked a flat? Prepare for long haul to get keys
Sources say slow movement of files in the BMC for over two years has lengthened the wait for flats booked years ago, as banks and private lenders are shying away from builders who are unable to complete projects on time
If you booked a flat a few years ago and still have not got possession of it, then be prepared to wait for anywhere between a couple more months and years. According to sources, builders are unable to complete their projects on time, as they have run dry in terms of finances.
With builders running short of cash, even moneylenders are shying away from them. The reason is that construction activity was brought to a total standstill for two years, thanks to Brihanmumbai Municipal Corporation (BMC) not passing any files.
However, there has been a sudden surge in approvals with the new commissioner passing files, and now builders are in search of finances to begin construction work on their projects. Lenders are still sceptical whether builders would be able to afford the higher interest rates in the current scenario.
According to a senior builder, the problem with the real estate industry is that for the last three years there has barely been any construction activity, but builders had taken huge loans from private lenders to purchase land and to cover other aspects.
“Approvals for projects were pending for almost two-and-a-half years. However, since August last year the civic body started passing files but it was too late, since builders had already borrowed money from banks and even private moneylenders, as things weren’t going as planned.
With activity grinding to a halt, stocks weren’t available to sell, and the finance flow came to a standstill, forcing many to default on their loans. Thus non-availability of finances has lowered the pace of construction and is resulting in delays,” said the builder.
However, defaulting on loans at the early stages has caused problems for builders. Anand Gupta, honorary treasurer of Builders Association of India claims that the no-approval issue has been a cause for turbulent times in real estate market.
‘Not builders’ fault’
“There’s no denying the fact that finances are a big issue for us. The real estate industry isn’t getting loans from banks because the builders have either defaulted on loans taken earlier, or most banks don’t give loans to construction firms anymore. Neither have the banks, the finance minister or the Reserve Bank of India ever understood that the reason for defaulting is that the builders were not getting approval for their projects, and not because of their own will,” Gupta said.
He added that the faith that private lenders had in builders has been shaken because many of them took loans, and since no construction work has happened, the possibility of returns has dimmed. “However, sensing an opportunity, most lenders have hiked interest rates and builders have no option but to accept their terms. This has indirectly affected construction rate and it wouldn’t be wrong to say that getting possession of flats will be delayed,” Gupta said.
A broker who helps builders obtain loans claimed that private lenders were giving out loans to builders of only those projects where construction activity is going on. Builders who only have land in their possession are facing difficulties in securing loans from private lenders. “Interest rates are so high that many builders and lenders themselves have realised that in the current scenario it would be difficult to get their money back,” said the broker on condition of anonymity.