Loan Scam Backwash

After the loan scam was unearthed last week, realty developers and companies providing home loan are finding it difficult to raise money from retail investors through corporate fixed deposits, despite offering coupon rates close to the maximum permissible limit of 12.50%.
The retail investors have become very cautious of the investments they make in the corporate schemes in the real estate sector. The schemes which were popular among the investors are also suffering from this blow.
Realty majors like Ansal Housing & Construction , Ansal Properties, Jaiprakash Associates and Unitech are offering coupon rates in the range of 10.5-12 .50%. Godrej Properties is said to be offering 8-9 % as interest on deposits.
In future the real estate companies may have to face more strict checks and laws say investment experts.  They also fear that the real estate companies will have to suffer if the alternative sources of funding are blocked. This may lead to the fall in actual sale of properties.
As one of the consequences of correction in overall property prices the realty developers may have to replenish margins that have fallen and will have to either borrow money or build more property in order to fill the gap in the lost margin.
In the wake of the loan scam Maneesh Kumar MD, Burgeon Wealth Advisors, added  “Real estate companies have not had an easy time ever since the meltdown of 2008 in rising funds. Recent headlines have further dampened the already difficult fund raising efforts by them.”

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