MIHAN SAGA-Many Developers still in Red-TIME OF INDIA
Many developers still in red
Shishir Arya, TNN, Sep 24, 2010, 04.45am IST
NAGPUR: Deepak Nilawar may be the only realtor having received an attachment notice from a bank but a number of other players having a stake in Wardha Road properties are also learnt to be in a debt trap. Some are in trouble with banks but many are also in trouble with private lenders in Hundi (promissory notes) market, say sources.
The realty slump of 2008, followed by a sharp drop in investor confidence in Mihan, led to blocking of substantial funds of these businessmen. Many had borrowed money from private Hundi market apart from availing institutional finance like bank loans to purchase these lands at astronomical prices.
On the brighter side, small investors who have bought plots from these firms need not worry. Their money is not entirely lost even though they may suffer some loss as the land may not appreciate to expected levels. Their principal amount is largely safe, experts say.
It all began with reckless investment into huge tracts of land along Wardha Road by developers. This continued for some time as Mihan hype continued. However, the chain broke due overall slump in economy and setback to Mihan, said a source.
This led to drop in demand for properties with developers' huge sums stuck in land deals. Suddenly, a majority of buyers turned into sellers further deteriorating the situation. Some realtors raised more money from the private sources to come out of the situation. That led to repayment problems, sources said. Many banks too stopped further funding of realty ventures, except with permission from headquarters which was not given easily.
Last year there were reports of a player in Wardha Road land having desperately raised almost Rs 13 crore from the Hundi market and another prominent one being hounded by recovery agents. Most realtors in debt belong to a close circle having affiliation to various influential political leaders, said the source.
"The land rates in Wardha Road have gone down phenomenally which indicates trouble. An acre of land which was being quoted for Rs 1 crore is being now offered for almost half the price or even less," said a builder.
Suresh Agrawal, a realty analyst from the Vidarbha Industries Association (VIA), however, said all was not over. Nilawar's appears to be the lone case and even if others are in difficulty, their networth is still comfortable, he pointed out. He confirmed though that realty sector had not entirely emerged out of the crisis as far as businessmen are concerned.