Realtors in bank­ruptcy court dou­ble in past yr

The Times of India (New Delhi edition) - - Times Business - [email protected] times­group.com

Ben­galuru: The num­ber of prop­erty de­vel­op­ers who have been dragged to the bank­ruptcy court has more than dou­bled in less than a year as a pro­longed slump in sales and the on­go­ing liq­uid­ity cri­sis make things tough for many in the coun­try.

For the pe­riod ended June 30, as many as 421 realtors were un­der the cor­po­rate in­sol­vency res­o­lu­tion process (CIRP), up from 209 as of Septem­ber 30 last year, data from In­sol­vency and Bank­ruptcy Board of In­dia show (see graphic). Out of the 421cases, 257 are on­go­ing while the re­main­ing have been closed, which means these have been dis­solved, with­drawn, or the firms faced liq­ui­da­tion. The num­ber of on­go­ing cases will rise fur­ther un­less the liq­uid­ity cri­sis is ar­rested, ex­perts say.

The num­bers, se­cond high­est af­ter the man­u­fac­tur­ing sec­tor, show the dis­mal state of the In­dian res­i­den­tial mar­ket, which has been ham­mered for half a decade. Ex­cess in­ven­tory ini­tially caused a slow­down, and then the sec­tor re­ceived a ham­mer blow from de­mon­eti­sa­tion, im­ple­men­ta­tions of RERA and GST, and fi­nally the IL&FS cri­sis, which stopped non-bank­ing fi­nance com­pa­nies (NBFCs) from lend­ing to real es­tate.

“Most de­vel­op­ers who have been taken to court were run­ning un­sus­tain­ably. It was al­ready a bad sit­u­a­tion in the last 10 years where they were bor­row­ing to pay the in­ter­est. The work­ing cap­i­tal re­quire­ment was funded by the lenders. With the NBFC cri­sis, the mu­sic has stopped,” Pankaj Kapoor, founder and man­ag­ing di­rec­tor of real es­tate re­search firm Li­ases Fo­ras, said.

Builders have been un­able to com­plete projects in the ab­sence of funds. Fund­ing by NBFCs tanked 73% to $140 mil­lion in the first half of the year, com­pared to $520 mil­lion in the pre­vi­ous year, as the RBI tight­ened lend­ing norms for such in­sti­tu­tions and hous­ing fi­nance com­pa­nies (HFCs) af­ter the IL&FS de­ba­cle, ac­cord­ing to data from prop­erty con­sul­tancy firm Anarock.

Ad­di­tion­ally, slow sales and a record un­sold in­ven­tory re­duced cash flow for de­vel­op­ers. Hous­ing sales con­tracted 20% in the third quar­ter across the top seven cities to 55,080 units, com­pared to the pre­vi­ous one. At the same

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