Coronavirus impact: Funding for real estate sector likely to go up by notches as risks increase

The cost of institutional funding for real estate projects during and post COVID-19 is likely to become expensive with financial institutions having to factor in risks of completion, construction timelines, supply chain disruption, zero absorption, not to mention the high cost of forex hedging, say transaction experts.Despite the government having reduced lending rates by 75 bps points, banks will continue to be cautious while lending to the real estate sector and NBFCs and HFCs too post the IL&FS crisis, may not be forthcoming either unless some steps are taken to encourage them to lend to the sector.The only recourse left to developers post the three-month moratorium will then perhaps be the domestic and foreign institutional funds who have all along been lending at 15-17 percent earlier and may decide to lend at 19-20 percent post COVID depending on the risks associated with the projects.Close The RBI moratorium for three months, say experts may resolve the cash flow issue but what will not get addressed is the issue of liquidity in the real estate sector. For those who do not know, the sector receives funding from four categories of investors – banks that includes PSU and private sector; NBFCs and HFCs… Read full this story

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