Realty fund low cost money scare for builders, developers

The real estate sector has run out of the realty funds which provide low cost money to execute building projects.

According to developers and real estate consultants, the cost of borrowing has shot up by over 100-250 basis points since January 2008.

This shortage could lead to stalling many realty projects and force developers to abandon projects.

To meet this requirement, as a short-term measure, realty developers and builders might consider freeing up existing assets to complete the ongoing projects.

Mumbai-based developer Orbit Corporation plans to raise Rs 150-200 crore by selling a part of its land bank.

Omaxe is looking for around Rs. 2,000 crore of "external funding" for its projects.

Some builders have turned to private financiers who charge exorbitant interest rates ranging between 18 and 25 per cent.

However, according to a media report, an official of Saffron Asset Advisors said that the credit crisis is a transient phase and will get incompetent players out of the system.