Hard-hitting repercussions for realtors, as their FDs go off demand

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 Real estate developers and housing finance companies probably will find it difficult to generate funds from retail investors through corporate fixed deposits.
After the housing finance scam was exposed recently, investors have become skeptical of investing in corporate deposit schemes launched by realtors, believe experts. This is despite real estate companies offering coupon rates close to the maximum permissible limit of 12.50%. Deposit schemes of home loan lenders, which were earlier sold in large numbers, are also finding few takers, distributors said.
There are about five realty firms and seven home finance companies that are currently raising money from investors — especially HNIs and the salaried class. Realtors, like Ansal Housing & Constructions , Ansal Properties, Jaiprakash Associates and Unitech are offering coupon rates within the range of 10.5-12 .50%. Godrej Properties is said to be offering 8-9 % as interest on deposits.
Real estate CFDs have experienced a wilting of investor appetite, ever since the housing loan scandal was unearthed. Real estate companies have been having a rough time post the recession of 2008 in raising funds. Recent revelations of investigations in the scam have further dampened the already difficult fund raising efforts by them.
According to investment experts, real estate companies will increasingly be subject to stringent regulatory checks and controls. Another speculation, according to investment experts, is that real estate companies would be in dire straits if alternative source of funding — like banks, private equity and mutual funds — dry up.
Another probable impediment which realtors are likely to confront likely faced is the triggering of margin calls in the event of a rapid slide in property prices. Developers, who have borrowed money by placing land/ project as collateral, will have to replenish margins that have fallen due to correction in overall property prices. Real estate developers will be forced to borrow money at high cost or place more property as collateral to compensate for the lost margin, money managers believe.

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