The stagnation in the property market coupled with the downslide on the stock market is taking its toll on developers, who are getting squeezed. As a result, many projects are being delayed and one has even been cancelled.
Having burnt their fingers in the stock market, many investors and flat purchasers have started delaying their monthly installments. Coupled with foreign funds shying away from real-estate projects, this has affected the liquidity of leading developers.
“Such a scenario is reminiscent of the property market 10 years ago,” says Pranay Vakil, chairman, Knight Frank global property consultants. “Developers are in for a multi-dimensional squeeze. Already, the high property prices have affected their sales. The upheaval in the stock markets has just deepened their liquidity crisis, making them borrow funds at even 28% to complete their projects. If they don’t they would not be able to rent or even sell their space.”
Vakil could not be more right. A leading developer in Mumbai, who has completed four of the five high-end residential buildings he had planned, has delayed giving possession of the flats by eight months. IndiaBulls is learnt to have postponed giving possession of offices in its commercial complex at Elphinstone Road to January 2009 from September 2008. Of the 250 malls proposed to be constructed last year, only 150 are now likely to be completed.
The financial crunch is not the sole reason for the delay in projects. Developers and real estate brokers say nearly 1,000 flats in the city are stuck for various other reasons such as rising cost and shortage of construction material like steel and cement and delay in getting approvals like completion and occupation certificate.
