Tuesday, March 17, 2009

Bankers Call the Bluff of Realtors

Now, who will call the bluff of bankers?

Finally, somebody is daring to tell the King that he is naked. That you can’t sell 1 or 2 cents of undivided share and 1000 odd sq ft for Rs. 4000 - 3000 per sq ft. Simply because, customers now realize that it just doesn’t cost that much to build and deliver. Developers who recently approached banks for their debt restructuring were given this music by most private and PSU banks. The question bankers asked is reportedly simple. Why do you need this restructuring? If it is for holding on to the inventory until recession passes, bankers were not interested. But if it is for reducing prices and clearing up the piled up inventory as fast as possible, bankers were game. But many developers are reluctant to be realistic, having savoured profits of 50% or more for some years now. Sales figures from both realtors and home-loan operations for the last two months show that even a 30% drop in prices may not be enough to clear the huge inventories. But the current move by banks to demand price cuts sounds hollow, as they themselves were party to this unrealistic boom, and unlike developers, are still quite unwilling to cut rates on existing loans, and unwilling to commit better rates for new loans for not more than one year.

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