While speaking fact, the real estate market met fluctuations for the past two years due to the demonetisation, implementation of Real estate Act (RERA) 2016 and goods and services tax (GST). However, from the beginning of 2018, the builders started clutching on tentative hope. Most stakeholders perceived that the matter would finally settle down in 2018 and the sector will resume.
But their hope started diminishing when the non-banking financial crisis (NBFC) struck in October 2018. The crisis started developing problems for the developers and the real estate sector. The stagnant prices affected project execution and delivery in 2019.
Now, the builders have been facing a huge inventory pile-up. Currently, no refinancing is available to all and lenders turned very selective. This situation made builders meet many changes in terms of liquidity to finish their projects. During the period, the home buyers started litigating for on-time delivery of projects that made some developers come up with alternative channels such as private equity to complete their unfinished projects. However, private equities are available only to the established developers who have sufficient unpledged assets. If so how are they tiding over liquidity crisis?
Unification
The Real Estate (Regulation and Development) Act formed the best rules for joint ventures. This implementation joined many small and big developers to complete the projects. While smaller builders help to get land rights and approvals, large builders obtain the brand value. Many joint ventures were signed after the successful implementation of RERA and still, the trend continues. This unified enactment reduced the burden of upcoming real estate developers as well as increased the project numbers of large peers.
Growth management
When a project is delayed, not only homebuyers lose money but the lenders too. While numerous lenders are changing to prominent developers to complete delayed projects, a few developers move to financial bodies to facilitate “development management”. In this system, big developers acquire projects from smaller builders in the revenue share basis. With full support from the lenders and the small developers, large developers enter the project under development management and invest required capital to complete stressed projects. Once the project is over, they move on to next.
Sale of commercial assets
As the liquidity crunch gets deeper, operational commercial projects are being sold to private funds and even overseas private equity funds come forward to take such projects to build their portfolio. In the current scenario, developers have started selling commercial assets to obtain more liquidity. Some under-construction commercial projects are also sold by some builders.
In reality, prices on properties have been low for a long time and with the burden of GST, the developers cannot continue with the existing margins. Hence, the demand for the real estate market is expected to stabilize so that escalation in prices will be seen. The present situation avails end-users with great discounts on property rates. GP Homes is one of the most reputed builders in Chennai offers affordable housing plans and the builders stand steadily even at hard times of liquidity crisis by having sufficient liquidity backup. Their monetary wellness did not let them drain at any worst time. It is advisable to invest with such a thriving builder to neglect all such fluctuations. They always stand upright in all circumstances.
