Loan for Real Estate Developers - All You Need to Know

Aug 04, 2020

The real estate industry in India is growing rapidly, with a predicted market valuation to reach around $1 trillion by 2030, according to a report in India Brand Equity Foundation. Such immense growth of the commercial real estate segment is primarily due to the increasing demand for property in the country’s ever-evolving IT industry, among other sectors.

Nevertheless, real estate development business also involves risks of varying proportions and magnitudes. Funding remains one of the major concerns, although real estate development loans can go a long way to solve this issue for you.

If you are planning to develop a project, listed below are few areas where you would need to invest in for a favourable outcome.

Investment Requirements for Real Estate Developers

  • Considerable inventory of unsold residential projects

Developers often rely on consumers for a portion of the building costs. Previously, prospective property owners invested in the home of their choice even before construction was complete. Today, buyers often wait for project completion before booking. Therefore, you are liable to experience a shortfall in cash flow.

As per a Business Standard report, more than 1600 housing projects have stalled development because of funding scarcity, accounting for approximately 10% of the total Mumbai Metropolitan Region project registered under RERA. Similar other trends were observed across major towns and cities in India due to fund constrictions. You can avail hassle-free real estate development loans if you perceive such cash flow shortage during the construction of a property.

  • Limited availability of credit for construction projects

In the past, real estate developers could conveniently avail credit from various financial institutions. Today, availing typical business loans for property development is much more challenging, thanks to several background checks and additional eligibility criteria.

Chances of increased delinquencies and frauds have led financial institutions to adopt these measures. Therefore, availability of choices when it comes to borrowing funds for property development has reduced.

Fortunately, Rupeek Fintech Private Limited offers instant gold loans to consumers to fund their various real estate projects under development. It’s no end-use restriction keeps its utility open for diverse funding needs.

Gold Loan – A Suitable Funding Option for Real Estate Developers

An Indian household is likely to have an abundance of gold jewellery kept idle. Isn’t it?

When requiring immediate funds, you can pledge the assets to avail gold loans for fulfilling immediate financial requirements. Whether you seek loans for malls or for other small realty developments such as an apartment, builder floors or shopping complex construction, these loans come as a smart financing alternative for all your realty business requirements. The funds can thus suffice for financing the purchase of construction equipment, payment of labour charges, raw material procurement like sand, concrete, cement, bricks, steel bars, and similar other expenditures.

A crucial factor to note here is that you only utilise the equity lying in gold to raise funds and the asset can be released once you repay the outstanding dues. Therefore, opting for a gold loan can be wise, especially if you need substantial funds and own gold of high worth.

Features of a Gold Loan and Benefits for Realty Developers

Among the several benefits of gold loans, the following are the most distinct aspects that set it apart from other consumer durable loans –

  • Minimal documentation

Gold loans are secured funds and lenders rely on the collateral than any other authentication for extending the advance. Thus, these advances do not require you to submit detailed information regarding the project under development.

Borrowers at Rupeek Fintech Private Limited can complete their documentation process for the gold loan in just a few minutes. Individuals can avail credit by submitting only KYC and ECS mandate documents to the lender.

  • No end-use restrictions

One of the most rewarding benefits of gold loans is that you can address diverse funding needs with the principal amount. Business owners can thus utilise the loan amount for multiple purposes. For instance, as a realty developer, you can allocate the sum as per your varying business needs like procuring raw material, payment to workers, and many more.

  • Quick loan approval and disbursal

Rather than extending advance processing for days or even months, gold loans offer a much quicker application and approval process. Rupeek thus offers instant approval of the applied funds to eligible loan applicants after valuation of the gold to be pledged.

Therefore, if your construction project is stalled due to lack of cash flow, you can seek a gold loan immediately and resume with the development work. Availing these real estate development credits can minimise delays, thereby helping to run your business efficiently.

  • Low interest rates

Another vital advantage of gold loans as real estate development loans is low interest rates. Assured security via the collateral on such loans is primarily why you can avail favourable terms. Therefore, it is simpler to repay these loans, as you need to bear minimal interest payments on your debt.

  • Ensured safety and security

A major concern for gold loan borrowers is the safety of their pledged ornaments. However, lenders today follow a strict protocol when handling these items. It is done to reduce risk of theft, loss or damage to the gold jewellery. For the loan duration, all your pledged assets are kept in lockers under constant surveillance.

Additionally, each item is also insured against theft and damage. Therefore, one can rest easy knowing that he/she would be able to reclaim these assets once gold loan repayment is complete.

  • Control loan tenor as per your convenience

Gold loans are generally short term credit options when compared to typical business loans. While the limited tenor can sound intimidating at first, a borrower can save considerably by following this minimal repayment schedule.

The government of India claimed in 2019 that it would inject around Rs. 25,000 Crore into its real estate sector to ensure completion of all stalled projects, according to an Economic Times report. Only time will tell whether this package would be sufficient to reboot the realty sector in the country or not.

Nonetheless, it is evident that realty developers can conveniently rely on real estate development loans to keep away any fund shortage. Gold loans are one of the few simplest financing options to be utilised when in need of immediate, high-value funds.

Is funding the only issue facing the real estate development sector today?

Not by a long shot!

Starting construction on a planned project is not as simple as it sounds on paper. Real estate developers need to endure a long and stressful approval process, involving building permissions and other formalities. You may have witnessed several incomplete projects across India due to these bureaucratic delays.

With the implementation of GST, property prices have soared, which has led to a decrease in demand. Such other factors also call for a re-focused approach to realty development, though financing being one of the major concerns.

Nonetheless, with the gold loans financing, small to mid scale real estate development can receive abundant funding. The funds available as gold loans, their significant benefits and easy repayment options thus provide you an opportunity to make optimum use of funds for your real estate business requirements.