In the midst of the second wave of the COVID-19 pandemic, home builders are concerned about whether they can at least pay the interest on the loans they have taken out. According to the industry, many of them are selling the apartments at cost or with low profit margins to pay the loan installments.
According to industry sources, banks had generously approved loans and many construction projects between Vijayawada and Guntur got off to a grandiose start with a positive response from buyers. The mood plummeted, however, when the government announced its plans to relocate the capital.
The projects were high end and large with 200 to 600 homes per company in the price range of 60 to 80 pounds per unit. By a rough estimate, £ 2,000 billion in loans have been approved by banks with repayment periods of 15, 18 and 24 months.
“Due to the COVID-induced lockdown last year, there was no demand for many months. The bankers are putting increasing pressure on themselves to pay off the loans, ”says a senior contractor.
Developers find it difficult to avoid defaulting their interest payments as sales and cash flow dry up. As a result, they are ready to seal deals even if the margin is low, explains another contractor who did not want to be quoted.
Looking for concessions
RV Swamy, chairman of the PR committee of the Confederation of Real Estate Developers’ Associations of India (CREDAI), said the second wave had struck before home builders could benefit from the effects of last year’s COVID pandemic. Builders are concerned about the consequences. The demand for residential property could fall.
The banks had announced a moratorium during the lockdown, but this only existed for a short time. In 2008 there was a recession. The banks then extended the loan repayment facility beyond a year. Similar measures must be taken now to save the industry, he says.