Short term borrowing for project and advances from customers are in invested in land and long term investments. This practice was seen in at least three real estate cycles. Players keep forgetting basics and becomes bullish on markets.
In boom, funds pore in are invested in future stocks. And at the times of delivery, fund starved industry left nothing with but to slow down or stop work on under construction projects. Making creditor run pillar to post to get his dues even after eight months is usual practice. Hence material suppliers, especially, cement companies never give a single hour credit to builders and developers. They deliver only after DD is encased in their bank accounts.
Marketing department is vanished and there is total darkness in that part of the office. A single seasoned person is seating on front desk with a long list of payments and as usual give reasons like ” Accountant is on leave”, “Director is out of country”, “Payment will be made after some international trade show is over”, “Madam’s signature required on cheque but she is coming only once in the office”, and all such stupid reasons to buy time.
The key position held by these people in the economy and where as 200 industries are dependent on them, the entire economy is at risk of such practices. Short term borrowing and long term investment. Is what the practice least required. Advances from customers are used to buy land and FSI presuming that rest of the stock will take care of construction. It is like this, eat the profit before it occurs.
Fly-by-night-operators having presence in the boom time will certainly give bed name to the industry by duping people or not constructing at all. Or the famous practice is just delay the project, make some negative statement so that people who have booked flats at Rs.3000/- take back their money and then sell the same stock for Rs.8300/-. since the rates have increased. These type of opportunists really spoils the name and since there is no ethics, real industry becomes bogus industry.
The first cut is staff salary, strength of staff, employing juniors in place of senior and asking senior to move on. Seniors are hunting for new bakaras who can offer them one crore and more package and when asked about unemployment, they say ” you see I am worth more than what was being offered so now I am on my own.” Then comes advertisement and advertisement bills from the agency. In the past, many big names have settled ad agency bills by offering them real estate units. The same is the scenario now. Majority of them have done barter directly with media and by passing the agency.
There is no standard of real estate development process nor we have transaction process rationalised in our country.