Andhra Pradesh

Builders under pressure to repay loan instalments

A view of the apartments that are under construction or ready for occupation, at Mangalagiri near VIjayawada.

A view of the apartments that are under construction or ready for occupation, at Mangalagiri near VIjayawada.

Amidst the second wave of COVID-19 pandemic, builders are worried whether they will be able to pay at least the interest on the loans taken by them. Many of them, industry sources say, are selling away the apartments at cost price or with meagre margins to pay the loan instalments.

Industry sources say that banks had liberally sanctioned loans and many construction projects took off between Vijayawada and Guntur in a grandiose manner as there was a good response from buyers. The sentiment, however, nosedived with the government announcing its plans to shift the Capital.

The projects were high-end and big with 200 to 600 flats per venture in the price range of ₹60-80 lakh per unit. According to a rough estimate, loans to the tune of ₹2,000 crore were sanctioned by banks with a repayment tenure of 15, 18 and 24 months.

“There was no demand for many months due to the COVID-induced lockdown last year. The bankers are mounting pressure to clear the loans,” says a senior builder.

The developers are finding it tough to avoid defaulting on their interest payments with sales and cash flows drying up. Consequently, they are willing to seal deals even if the margin is meagre, explains another builder, who did not want to be quoted.

Concessions sought

When contacted, Confederation of Real Estate Developers’ Associations of India (CREDAI) public relations committee chairman R.V. Swamy says even before builders could come out of the impact of the last year’s COVID pandemic, the second wave has struck. Builders are worried about the consequences. The demand for residential properties might fall.

The banks had announced a moratorium during the lockdown but it was for a brief period. In 2008, there was a recession. The banks had then extended the loan repayment facility beyond one year. Similar measures have to be taken to rescue the industry now, he opines.

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Printable version | May 23, 2022 3:30:02 am |