‘Small, medium realty developers find it hard to meet working-capital needs’

Anil Urs Bengaluru | Updated on June 15, 2021

Large players, however, have attracted capital in the last one year, says CEO of Motilal Oswal Real Estate Investment Advisors

Small and medium property developers, who were reeling under liquidity crunch are now impacted by the Covid-19 pandemic. They are facing challenges in meeting their working-capital requirements.

“With scarcity of capital, only the top brass developers have attracted capital in the last one year. Small and medium players have found it difficult to raise funds. Despite demonstrating a strong sales in the last half of FY21, these developers have faced challenges in meeting their working capital requirements,” Sharad Mittal, CEO, Motilal Oswal Real Estate Investment Advisors told BusinessLine.

“During the course, many small developers have partnered with larger developers in order to raise funds. This process of consolidation, which started at the advent of RERA in 2016 has accelerated during the pandemic,” he added.

On NRI investments, Mittal said, “Over the past two years, there has been a depreciation in the rupee. This has given NRIs more value for their money invested in India. Post the pandemic, there has been an increased interest in the residential segment due to the stagnant prices and decade low mortgage rates. The above factors point towards an opportunity for NRIs to invest in residential real estate.”

Temporary blip

On the outlook for the sector this fiscal, Mittal said, “The sector gathered momentum during the last 6-7 months on the back of bottomed-out prices, peak affordability, historically low mortgage rates, government incentives. Several developers clocked record sales in the last two quarters of FY21. Now on the back of this, a surge in Covid-19 cases in this second wave has most certainly put a temporary break on some of that momentum.”

“However, we believe that the recovery that the sector witnessed in the last few months was more fundamental and demand-led due to which home buying will resume pace in this fiscal as well after this temporary blip,” he added.

Published on June 15, 2021

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