The downturn in the real estate sector has hit the fortunes of builders, developers, dealers and investors hard. While the big names are somehow coping with the situation by raising funds from private equity investors and high net worth individuals, the small players are the worst off, unable as they are to sell their projects at a profit or raise funds to implement other plans.
Those developers, builders and investors who entered the market in the last three years, when property prices were soaring, are the ones finding it difficult to remain afloat. They invested in costly real estate, in the hope of selling them at huge profits later. Contrary to popular belief, the prices crashed, catching the same people on the wrong foot.
CMD of Raheja Developers Naveen Raheja, who implemented a number of projects in Gurgaon and Manesar, said the problem is acute for those players who invested money borrowed from banks or private investors. For them, the cost of holding the investment is very high. Many of the small developers and builders are thus overstretched. They have borrowed huge sums, which they are unable to service now.
These developers used to buy land at very high prices and launch projects on them and raise money. Earlier, as most projects got sold on the first day of launch, the developers could implement the projects from the money collected from advance selling. However, following the slowdown, they have had to implement projects with their own funds to meet buyer deadlines.
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