Residential real estate price correction

There is no doubt that real estate developers’ balance sheets are very stressed now. With cash flows from fresh sales housing, debt servicing has become a challenge for many. A few defaults have happened; they say more can be expected soon.

One other factor that might affect is the Reserve Bank of India’s recent directive to banks asking them to be mindful of equated monthly installment subvention schemes on loans will further seriously dent whatever sales were taking place in the last few months. Even worst, new capital sources for real estate developers are severely constrained at the moment. There is only a small amount of bank debt available, absolutely no public market equity anywhere in sight, and a limited appetite from real estate funds, non-banking finance companies and high net worth individuals, all three of which are looking for high yields and adequate collateral for their money.