Safeguarding Indian Realty from Evergrande phenomenon
Safeguarding Indian Realty from Evergrande phenomenon All published in The Print While the above issue does raise concern, however, before one addresses the above, a more fundamental question needs to be answered : “Why do developers end up borrowing more than they can chew ?” And the answer lies in the structural uniqueness of real estate business. 1. Capital requirement remains unpredictable A developer typically plans his funding through three sources : · Own equity · Borrowings from banks etc. · Customer Advances Owner’s equity has physical limitation, bank borrowings too are limited by regulatory norms. Since customer advances remain unpredictable, financial closure quite often remains a puzzle. Further when the projects gets completed, developer’s capital requirement comes down significantly, therefore, developer would prefer capital that can be repaid after the project. To address all the above concerns, developers en