By Ruma Dubey

The roadside realty broker at the corner of the street has shut shop. And so have many of his peers, who ran similar outfits. The big brokers are getting desperate. The same guys, 8-10 months ago, did not have the time to answer even basic questions on the phone. Today, they are now calling up people, soliciting business, only to hear the sharp rebuttal disconnecting tone, time and again.  Ditto for developers and builders too. Though business has been down for the past 4-6 months, they at least had people visiting their sites or making enquiries. But now, even that seems to have dried up. A visitor walking to their site could either be a disgruntled customer or debtor coming to collect the dues. Yes, the wall seems to be developing cracks for the realty sector.

A cursory talk with a cross section of realty brokers showed that business is really bad, majority of them have not struck a deal in around 6 months now. The builders or developers till two months ago were bleeding yet maintained that there was no pain. But today, they too admit that things are rough; the pain is evident.

This is at the grass root level. Directly from the horses mouth, so to say. But realty companies, when they give TV interviews, continue to maintain that things are not too bad, talk about robust sales. Well, we can only say, their tune on TV will also soon change.

Apart from rising interest rates, inflation and totally unaffordable unreal realty prices sapping out demand, the sector is expected to see some more trouble. The involvement of DB Realty and Unitech in the 2G scam has cast a very deep and disconcerting shadow on the sector. PSU banks, SBI, Bank of India, Bank of Baroda, Bank of India and Indian Overseas Bank have already served notices to dozens of real estate companies to recover around Rs 20,000 crore of their exposure by March. This demand is for the restructured loans of 2008. And the demand comes at a time when realty companies are as such seeking more restructuring of the very same loans.

This apart, banks are also turning down new loan proposals of these realty companies.  Short terms loans, as such were a no-no and looks like long term will also get tougher. Topping off the cup of woe are serious concerns about corporate governance issues. Banks now plan to seek clarifications from companies, seeking information about proposed end use of loans that have already been sanctioned, but not yet disbursed.

More than the companies, this actually spells bad news for customers who have put money in projects yet to be completed. Paucity of funds is sure to delay the projects further. Yes, PE funds might step in where banks fear to tread. But PE funds will come to the rescue of big developers, what about the scores of projects of mid size and smaller builders?

Prices are expected to see some small correction but nothing on the lines of what we saw in 2008. A 10-15% price fall, at the most. And at those levels, buying is expected to come in. India has a huge population, many have no homes and many today have better earnings; they are sure to jump in to buy when the chips are down.

Realty stocks? They have been beaten down to pulp. The broader outlook continues to look bleak. But if you have this insatiable urge to yet own realty stocks, go for developers with projects having substantially lower execution timeline. And big non-no to those involved in the scam.