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Lehman crisis to hit Indian real estate
| September 19, 2008 |  (2 votes, average: 5 out of 5) Loading ... |
The US financial crisis is expected to negatively impact the Indian real estate market .Global banks and brokerages have had to write off an estimated $512 billion in subprime losses so far, with the largest hits taken by Citigroup ($55.1 billion) and Merrill Lynch ($52.2 billion). The collapse of Lehman Brothers, the most recent of the big names crashing, will have a tremendous effect on the already floundering property market in India. “Money is going to dry up. Options before developers are very few as they are not able to raise money. As a result, their existing projects will suffer,'’ said Vakil, chairman of Knight Frank India, a global property consultancy firm.
According to housing experts, about four billion dollars has been pumped into the Indian real estate market by FIIs and venture capital funds. “Another $12 to $14 billion was to flow in within the next 18 months. This will not come anymore,'’ said Vakil. Lehman Brothers Real Estate Partners had given Rs 740 crore to Unitech Ltd, for its mixed use development project in Santa Cruz. Lehman had also signed a MoU with Peninsula Land Ltd to fund the latter’s projects to the tune of Rs 576 crore. According to him, long-term sentiments are bad and it will only worsen. Sources said several builders have started taking loans from private money lenders at high interest rates of 30% to 40%.
Anuj Puri, chairman and country head of Jones Lang Lasalle Meghraj said this is not the end of the global financial crisis. “A lot more will come out, which will have a negative impact on the property market,'’ he said. Puri observed that in Tier 2 cities prices have already dropped by 15% to 20%. However, there has still been no price adjustment in Delhi and Mumbai. “Developers are expecting business to pick up during Diwali. But it is unlikely to happen anytime soon. As it is, developers are facing a liquidity crunch. The big ones are using their own capital they made when the market was booming for the past four years,'’ added Puri. However, he said that none of the builders had gone belly up.
News Published Under: Real Estate India |
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