Over half a million direct jobs are expected to be lost in the real estate space in the near future, according to the National Real Estate Development Council. Indirect job loss will also result in the associated cement and steel industries on a very large scale.
With innumerable real-estate projects coming to a halt across India (worth Rs 1.8 trillion), the sector is clearly going through a slump. Builders and developers are unable to repay loans to shadow lenders, that is, non-banking housing finance companies or NBFCs. These are the lenders other than the regular banks who are the main source of funds for a majority of the builders. Sales is also dipping drastically because buyers are unable to afford property.
It is reported that approx. $10 billion in the form of development loans is waiting to be repaid in the first half of 2020. This may impact the mainstream banks that have given loans to the shadow lenders or made investments in their bonds.
With many property developers and builders going bankrupt, the pressure on these shadow lenders or NBFCs is mounting. Not only will there be more individuals unable to repay mortgages to banks, but the NBFCs will default and even the builders who have borrowed directly will hardly be in a strong position to repay their loans to the banks.
Buyers, on the other hand, have no other option but to wait for new developers to show some interest in the projects that have been stalled, and take action to complete them.