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Developers Look Forward to Private Lenders for Support
The much-vilified loan shark, once the staple of movies and theatre, is now donning angel wings to save developers from the swamp that institutional lenders abandoned them in. A string of all-cash deals are happening today in the realty sector with private financiers — plain-vanilla money lenders, relatives or business associates — pitching in to bail out companies struggling to raise money for projects they are committed to, say developers and consultants. In return, these lenders are being offered nearly double the stake in projects than what was being given till a year ago.
“Private financiers are getting higher stakes in projects because sales and pre-sales have slowed down and many projects are languishing at the construction stage. Developers used to finance their projects through presales, which is currently not an option. Liquidity pressures are mounting and developers are choosing to dilute higher equity stake to obtain the required execution capital,” says Shobhit Agarwal, joint MD (capital markets), Jones Lang LaSalle Meghraj.
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