After basing its report on a database of 11,000 developers, real estate research company Liases Foras has come out with a disturbing revelation about the construction industry in India. The report stated that builders in the top 8 Indian cities i.e. Mumbai Metropolitan Region, National Capital Region, Pune, Hyderabad, Chennai, Bengaluru, Ahmedabad and Kolkata owe banks and NBFCs an astounding 4 lakh crore ₹. While the annual EMI of these loans is 1.28 lakh crores, the total earnings of these developers (Before interest and tax) are barely 57,000 crores every year. The IL&FS default and the ongoing speculation about DHFL have made the industry even more nervous.
Pankaj Kapoor, founder & MD of Liases Foras said “the situation of developers is akin to an elephant in a well which is unable to come out on its own. Somebody needs to replenish the well. But can we find cheap capital to refill the well?”
3 parameters were used to describe the sad state of affairs in our real estate sector. The report went on to say that in the past decade, while the value of stock sold increased 1.56 times, the value of unsold stock increased 4.72 times.
While volume of sales has gone up 1.28 times, the value of inventory has increased 3.3 times.
And in the same period while inventory has risen much further than sales; lending to the real estate sector has grown in a monumental manner from 1.2 lakh crore to 4 lakh crore ₹ reflecting the abysmal state of the sector.