Realtors may miss project deadlines

BANGALORE: Leading real estate developers in Bangalore feel that the bribe-for-loans scandal could have a short-term adverse impact on the sector. Some also believe that it will have the salutary effect of cleaning up the system.

Banks that have exposure to real estate are stepping up their due diligence. Such scrutiny may tighten realty firms' liquidity positions as banks may go slow on loan sanctions.

"In the immediate term, banks will be very cautious. But borrowers with a good credit history will be spared of the trouble," said M R Jaishankar, CMD of Brigade Group.

J C Sharma, MD of Sobha Developers, said there could be problems on the liquidity front. "But I think stringent checks will only cleanse the system," he said.

Though some realtors dismiss the problem as a minor aberration, there are worries that project pipelines and deadlines would be impacted. Some even say that banks and financial institutions may recall some loans to avoid them becoming non-performing assets (NPAs). "This may be true for companies that have deployed resources wrongly," said Jackbastian Nazareth, COO of Puravankara Projects . He felt that loans above Rs 50 crore would be critically reviewed.

Banks had already turned cautious during the recession. The latest developments would make them even more so. "One more level of scrutiny is welcome to avoid mishaps," said Irfan Razack, CMD of Prestige Group. But he too thinks firms with good balance sheets and credit history will not be affected.

The ones that are badly impacted could be forced into the hands of moneylenders that charge much higher interest rates, pushing their costs up significantly.