Over the years there have been a lot of reforms in the existing real estate debt consolidation laws and there are also a few new legislations that have and are coming up. This has resulted in the drive in the consolidation in real estate. This is due to the realization of the builders that there is a change in the environment in which these builders operated in the past.
It is seen that this has also resulted in the change in the behavior of the homebuyers as well as the lenders of late. It has given them the strength and confidence to make and take on them as the case may be.
The raft of legislations and reforms in the real estate sector has driven consolidation especially with the several smaller developers in this sector as well. These smaller developers are either monetizing the land parcels that too on an outright basis or entering into a joint agreement for development and management.
The recent developments
There was a significant liquidity crunch noticed in the real estate market that was unexpected. Adding to the woes of the real estate business is the attitude and change in the lending policy of the banks. That has led to several developments in the law in the recent times.
After the great recession the banks have been strategically and specifically more focused on the crackdown of the NPAs or non-performing accounts. This change in the lending policy of the banks has affected the money market especially the lending market is several different ways. Some of these are as follows:
- It has worsened the position of the lenders
- It has also affected the quick transformation process in this sector
- This effect according to the experts has led to unaccounted cash transactions
- Several small and medium sized developers are now finding it very tough to get a loan due to the stricter guidelines
- This financial crunch has also affected their credibility to generate more sales and
- It has also raised the current preference of the homebuyers for more robust execution track record.
Apart from this, the change in attitude and lending policy of the governing body has led to the lack of financial strength of the developers, especially the smaller ones. They cannot obtain a loan from banks or from any other sources for debt relief such as nationaldebtrelief.com to consolidate the real estate debts. As a result, they are now forced to form an alliance with the big developers.
Change in business scene
The amendments in the law have also brought in changes in the business of the developers as well.
- According to the property advisors, the modern builders are feeling the change in environment as well as the behaviors of the homebuyers, lenders as well as other stakeholders of their business. This is because they have gained a lot of strength and confidence over the years with these changes in rules and legislation.
- There are a few big changes as well which has enabled the developers and builders to adapt to the new scopes and realities that will lead them forward.
- There is also a lot of a structural adjustment being made so that it can align with the transformed setting. This will allow the developers top form an alliance to monetize the land parcels so that they can ease their debt burden.
- Whether it is a residential project or a commercial building this pact has facilitated a strategic edge to the ventures. This, the experts believe, is the result of the vertical of debt stressed businesses that has helped them to garner more such beneficial partnerships.
As a result, there is also a change in the standpoint of the homebuyers. They are now of the view that it is this change in the business setting of real estate that has been the boon to them. This is because these changes have eliminated the possibilities of the unscrupulous developers with little or no credibility to remain and survive in this real estate business.
This means that the recent regulatory changes have left no space for the not-so-serious builders to breathe and sustain for long. In a way this means that the homeowners are now have lesser possibilities for being cheated or even misled by the private financial organizations when they want to take any debt consolidation loan using their assets.
The scene before
Before these reforms in the laws came into light there was no legislative tightening on the developers. It was very easy for the realtors to expand their geographic reach thorough several means and especially by harvesting up land parcels before even completing their existing projects. This led to a lot of confusion before as well as after the purchase for the homebuyers as well as the lenders to know the exact status of the property.
- However, all this is rapidly changing now, thanks to the change in the rules and the reforms brought in by the government. Those realty developers, who acquire large land parcel usually used to sell it off to the local developer outright which is not possible now due to the new rules.
- Moreover, the builders that buy several plots with an interest of geographic diversification cannot make any delays in the completion of the projects and cannot even decide to monetize the land in the given scenario to support the completion of their projects.
According to the new rule it is required by the builders to maintain at least 70% of funds at all times that they collect from buyers in a dedicated and separate bank account. This prevents any diversion of funds in case a new project is taken up by the same builder. This has resulted in further elimination of chances of delay due to shortage of funds, which was the most common reason for several stalled projects in the past.
It has also raised the liquidity burden of the builders as they cannot launch any new project before securing proper approvals from the right source. All this have affected the real estate debt consolidation field by a great extent.