NDTV Profit is reporting today unconfirmed developments that the Real Esate King DLF is to borrow Rs 4000 crs to Rs 5000 crs from Cash Rich Dollar Billionaire,Malvinder Singh who sold his Ranbaxy stake for Billions of Dollars to Dai-ichi of Japan recently
The alarming note is not the quantum of Borrowing but the reported Interest Rate of 30% to 35% pa !
Taking Extremes,if this Borrowing goes through,DLF will be bearing a very high Interest outflow of a Minimum Rs 1200 crs (30% of Rs 4000 crs) to a maximum of Rs 1750 crs (35% of Rs 5000 crs)
This is simply crazy !…just reflects the reality that there is such a huge ongoing credit contraction and Corporates are simply not getting access to Big Scale Funds from regular financing sources of Banks and Institutions
The Realty Sector is facing a Demand Ebb on one hand and a Huge Life Threatening Credit Contraction on the Other…..A Further Fall across the Board in Real Estate Prices Nationwide seems inevitable in these circumstances
There will be big consolidation as smaller builders and developers who joined the Bandwagon in the past few years will have no alternative but to forcibly sellout as their financiers will exert even more pressure
Shares Prices of Real Estate Scrips have already crashed over 90% from Highs this Year…How much more can they fall !…this will depend on the Quantum of Debt these Companies Carry and the extent of default in servicing it