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With sales refusing to pickup and the economy in dire straits, its no secret that the real estate sector is in a severe recession. Not only have new projects failed to find any takers, even the old ones are struggling to survive. That the builders are in a severe mess is evident by the ongoing public outcry, court cases, media coverage, street demonstrations etc..but the chain reaction has also started to hit the banks which have lent money to this sector. Recent figures of sales in the top eight cities shows that home sales increased only 6% in the past 1 year. Infact,the home sales in the largest real estate market of India,the NCR,fell by 10% from a year ago. New residential launches in Mumbai had dipped by 36%, In Bengaluru by 27% and in NCR by 20% in 2015. If this scary and precarious situation continues, it may well lead to defaults by the real estate companies, to whom banks have an exposure of 1/5 of their total assets. If the prices go down further, the banks will be left holding mortgages which are much more than the security that the banks are holding against these loans.If that happens, the…
