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The prevailing uncertainty in the sector has badly hit the real estate stocks, forcing investors to have second thoughts on putting their hard-earned money into the sector. The recent economic slowdown and inability to complete projects on-time have been the major contributing aspects. This year alone, there has been a dip of around 38% in the stocks. Few years ago, the scenario was different with many preferring real estate investments. However, those early investors will now have to bear huge loss amounting to even 70 percent or more, observe experts. The prevailing vulnerability in the Indian real estate market has led to several researches on the resulting factors and suggestions by experts. Here are few critical observations that came to light in the analysis. The debt encountered by Industry is approximately 55 % as compared with FY09. Several realty companies are trying to overcome the financial crunch, however, amidst the entire struggle, there is delay in project completion or projects are terminated too. Yet another significant factor is the inability of banks to continue earlier terms of lending money. Earlier, banks remained the main source, but the destructive economy fluctuations and real estate trends made banks to add strict limitations on the lending amount. Private equity funds and FDI, two other funding sources are also not providing adequate financial support. The “stress score” of real estate sector is now -132, which stood at favorable -32 in 2010. The term Stress Scores officially implies the capability of organizations to manage interest fluctuations and liability. A figure such as -132 is extremely low and is a strong indicator of worsening financial condition in the sector. High interest rates and the ongoing drop in rupee value are equally responsible for the slowdown, points out analysis. RBI, which earlier were charging low-interest rates, have raised the rates, especially on short-term loans. The cumulative result of all these financial concerns have been critical financial crunch in the sector. Lack of steady funding leads to delay in projects and higher costs. The significant rise in property rates have prevented many from investing in the sector. The present situation calls for immediate implementation of well-researched and effective reforms to establish the much required balance. For more articles on real estate updates please visit our Property Reviews and Ratings website.
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