Track2Realty Exclusive-Yearly Analysis: Many of these cash-strapped developers may find it difficult to get bank loans as well. Bank lending is the single largest source of funding for developers, who require funds primarily for construction finance but also to service debt.
“There are new banking norms that check how much equity is there to make sure that the loans are absolutely construction-linked. There are no ad-hoc loan disbursals,” says Goenka.
Traditionally, the Reserve Bank of India (RBI) has taken a cautious approach towards banks’ exposure to the segment, classifying it as sensitive sector along with capital market and commodities in view of the higher risk involved due to price fluctuations.
Loan flow to realtors took a hit following the corporate loan scam in November 2010 when Central Bureau of Investigation (CBI) arrested eight senior officials from banks and financial institutions for violating prudential norms or leaking vital information.
Other than that, the controversy over the allocation of second generation airwaves (2G), which involved a few real estate firms, also made banks more risk-averse.
