BUYERS WAITING FOR PROPERTY PRICES TO FALL
Just banks reducing interest rates will not help in reviving sentiments; builders will have to bring down prices for buyers," the chief of the Indian Banks' Association added.
Bankers say demand for home loans has fallen because buyers are waiting for property prices to fall. "Banks have taken the initiative in cutting home loan rates, and prices of cement and steel too have fallen, but builders have not reduced property prices," said Union Bank of India CMD MV Nair. Although RBI relaxed some bank lending norms for the building sector last weekend, it remained quiet on the issue of restructured loans to builders.
Analysts have expressed concerns about the financial health of the realty sector. India Infoline fears that the liquidity situation of developers could worsen further if banks refuse to refinance maturing debts of real estate companies and maintain the credit freeze on their accounts. "We reckon that debt maturing over the next 12 months for Unitech, Sobha and Puravankara is higher than our estimate of these companies' revenues over the corresponding period. The situation with Omaxe, Parsvanath and Ansals also remains precarious, owing to large land advances and high receivables," it said in a research note.
The building sector has seen a raft of credit downgrades amid refinancing concerns, and bankers say the sector has little choice but to cut prices.
"If a builder does not pay, banks would either initiate a recovery proceeding or restructure the loan. A recovery proceeding often results in lower realisation. This hopefully should indirectly put pressure on builders to bring down price and go for negotiated sales," says Indian Overseas Bank CMD SA Bhat.
Courtesy:- ET dtd:- 20th Nov. 2008
Bankers say demand for home loans has fallen because buyers are waiting for property prices to fall. "Banks have taken the initiative in cutting home loan rates, and prices of cement and steel too have fallen, but builders have not reduced property prices," said Union Bank of India CMD MV Nair. Although RBI relaxed some bank lending norms for the building sector last weekend, it remained quiet on the issue of restructured loans to builders.
Analysts have expressed concerns about the financial health of the realty sector. India Infoline fears that the liquidity situation of developers could worsen further if banks refuse to refinance maturing debts of real estate companies and maintain the credit freeze on their accounts. "We reckon that debt maturing over the next 12 months for Unitech, Sobha and Puravankara is higher than our estimate of these companies' revenues over the corresponding period. The situation with Omaxe, Parsvanath and Ansals also remains precarious, owing to large land advances and high receivables," it said in a research note.
The building sector has seen a raft of credit downgrades amid refinancing concerns, and bankers say the sector has little choice but to cut prices.
"If a builder does not pay, banks would either initiate a recovery proceeding or restructure the loan. A recovery proceeding often results in lower realisation. This hopefully should indirectly put pressure on builders to bring down price and go for negotiated sales," says Indian Overseas Bank CMD SA Bhat.
Courtesy:- ET dtd:- 20th Nov. 2008
