Timely completion of under-construction housing projects and rollout of new ones could take a hit following the liquidity crunch faced by non-banking financial companies (NBFCs), which had become the lifeline of real estate in the past few years.

NBFCs, who are estimated to have so far lent Rs 4 lakh crore to the real estate sector, have turned extremely cautious in sanctioning loans or disbursing those already sanctioned after the IL&FS crisis.

The real estate circle expects a churn in the marketplace over the next 12 months where weaker developers will either exit projects or bring in a stronger player as a co-developer.

The NCR/Delhi region is worst-hit even as the Calcutta market, too, is affected. However, the city will be spared to a large extent as NBFCs have been a late entrant in the market, where loans offered by high net worth individuals (HNIs) usually finance new projects.

According to Anuj Puri, chairman of Anarock, lack of sales and overhang of unsold inventory is causing the crisis. “Launches in India is down to 225,000 units, nearly half from the peak. There will be most definitely a slowdown in launches as developers and NBFCs turn cautious,” Puri said over the phone.

Rahul Saraf, owner of Forum Projects, compared the present situation to India’s Lehman moment.

“There will be a huge cascading effect in the economy if credit flow to real estate sector is not resumed soon. It will impact several projects,” Saraf said, adding developers usually take bridge finance to complete projects or to roll over existing loans, from NBFCs. “If that stops, people will have to sell assets,” he said.

According to Shobhit Agarwal, managing director & CEO of Anarock, the recent NBFC crisis has “clearly spelt intense gloom — if not outright doom — for Indian real estate”.

“After the IL&FS crisis, some NBFCs even halted the disbursal of earlier sanctioned loans to developers on fear of widening the funding crisis. The worst phase came when some NBFCs urged developers to return the money that was disbursed to them so that they can repay their dues,” Agarwal wrote in a note on Monday.

The note says nearly $34 billion of mutual fund debt in NBFCs and HFCs (housing finance companies) is maturing between October 2018 and March 2019.

Before the crisis, real estate was already dealing with a massive cash crunch and subdued demand because of which more than 75 per cent of the available credit facility has already been exhausted.

Rishi Jain, managing director of Jain Group, said it was time to doggedly focus on existing projects. “Completing on-going projects is now paramount,” he said.

Saraf, however, said the impact on the Calcutta market will be limited. “Traditional borrowing from the secondary market (HNIs) is strong here and there is no issue so far,” he said.

Because of the relatively smaller size of business than other metros, NBFCs were late in coming here and this has been a boon for the market, industry observers noted.