Running On Empty

Half a decade of slowing demand, regulatory changes and tight financing have taken the real estate sector—and those lending to it—to the brink of a shakeout.

- Samar Srivastava & Pooja Sarkar

Ten minutes into our conversation, Khushru Jijina’s warning jolts us. “The truth is that you will see a lot of projects lying unfinished,” says the managing director of Piramal Capital and Housing Finance. “Thanks to consolidation, there are several developers doing well whereas some are in distress,” he adds. He’s well placed to know. After all Piramal has 38,700 crore lent to the country’s developers and Jijina admits that he’s recently taken a close look at his loan portfolio. Visible from the conference room of the Piramal Capital offices in central Mumbai is the outline of a vast decade-long project—the Lodha World Towers. It’s Exhibit A of a decade that saw inflating asset prices that investors piled up, based on the Greater Fool theory (there’s always a sucker around the corner willing to pay a heavy price). Circa 2018 we’re left with slow user demand and an over leveraged industry grappling with a changing business model.

The last five years have seen India’s home builders hurtle from one crisis to another. Each time they’ve kicked the can down the road and borrowed money to stave offthe inevitable. As a result, most developers survived on what can at best be described as an oxygen mask of money at high interest rates. There is every indication now that this mask is being pulled offall but the very best. Jijina’s second prediction is that only 10 percent of developers, who have a clear focus on execution and sales, will survive.

The length and severity of this slowdown has confounded even the most ardent optimists that