Property developers next in firing line from NBFC liquidity crisis

India’s banking liquidity crunch is extending to the nation’s property developers, threatening to derail a nascent recovery in the property sector. Home builders in India have increasingly been turning to non-bank lenders or NBFCs for funding as traditional financiers struggle under bad loans. But following the government’s seizure of troubled shadow bank Infrastructure Leasing & Financial Services Ltd (IL&FS) earlier this month, that avenue may be choked off too. With non-banking financial companies (NBFCs) themselves struggling, their disbursal of loans to developers has slowed significantly said Anuj Puri. This has hijacked Indian real estate’s growth story over the short to mid-term.

Things had been looking up for real estate in India with apartment sales increasing 8 percent in the nine months through September and new project launches up 18 percent from a year ago, according to Anarock. That’s after a sustained period of uncertainty caused by 2016’s demonetization and the roll-out of a nationwide sales tax. Some Rs 4.64 lakh crore ($63 billion) of residential projects are in limbo according to Anarock, and Jaypee Infratech Ltd. and Unitech Ltd. are among developers that have been taken to court by irate homeowners.

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