Government Bans Overseas Borrowing for Realty Companies

In a move to curtal speculation in Real Estate, the Government of India under the guidelines of Finance Ministry just a while ago banned all Real Estate companies from raising capital from overseas markets directly hitting to their bottomline and ambitious projects.

Indians had forgotten that economy can grow only when you create wealth and not simply by unreasonable REAL ESTATE prices which hurt manufacturers, industrialists, service providers and IT/ITeS companies to establish and execute projects employing millions of Indians.

Realty Companies like Unitech and DLF will be the worst hit it due to their large portfolio of loans. Mr. Chandra CEO of Unitech said,

More than interest rates, the concern for developers is the availability of funds. Indian banks are not in a position to meet the funding requirements for large projects being undertaken by the bigger developers for various reasons, single borrower limits, high risk weights for real estate lending.

Way back in 2006, India's Central Bank, RBI had raised lending to Real Estate projects citing they are risky portfolios for a bank. The ban will have an impact on the real-estate companies as the Reserve Bank of India has blocked all the avenues for real-estate developers to raise the funds. In March-07, RBI had refused Citigroups investment in Ansal Properties.