High-debt level is haunting after developers this time. The interest burden is likely to ascent by 15-20% during this FY. RERA defines that the minimum escrow account balance should have potential of 70% building completion. RERA will mount the debt levels upon the builders. Already the real estate market of India is going through market flatness; this move might make it to the base- as per the leading development companies of the country.
BSE Realty Index shows that the companies under its ambit had a combined debt of Rs. 52,598 in previous FY (as indexed till Sept. 2016), this year it gets a blow of 7.3 per cent up. In Sept. 2016 these companies had an average 0.8 times debt to their total equity. It won’t be surprising, if top developers have been set debt of 15-20 per cent in current Financial Year.
RERA is fiddling builders in its every fold and unfold, just to keep the market safe from further negative cash inflow. Without prior approval no project can be launched henceforth, that equivalent sum will be shooed. A developer won’t be able to juggle amount taken from consumers from one project to another. It’s mandatory for developer to keep 70% of the total advanced booking amount to their escrow account and use the amount for the same project development. Developers have been restricted from pursuing project sale acquirement.
Developers have to run into debt project-by-project this might lead to slump in new project launch. Any project should be done and completed with every required approval. Promoters are forbidden from advertising any project starting from commencement to completion. Previously they were able to finish a project with 50% from sale progress which is dropped down to 20-30% under RERA norms.
West Bengal RERA expert Mr. Mahesh Somani said, “Kolkata property market is relatively reasonable for every class of homebuyer. But that’s not enough to push the sale volume. People willing to buy property in Kolkata are completely in riddle in terms of identifying the right time for property investment. RERA, implementation will definitely secure their interest but for now it’s adding up woes to the builders.”
Prime property markets in Delhi NCR, Gurugram, Mumbai and Kolkata is currently undergoing with 50% less in property sale in comparison to the previous accounting year. RERA shuts its doors for small scale developers of the town. Even biggies will find it challenging with business proceeds. Under this oddball market scenario developers can’t even think of price hike too.
– LNN (Liyans News Network)