The real problem isn’t in completing a project but in selling out units in a project.
When a project is sold out, then the customer advances more than cover the construction cost of a project.
The final 30% stretch of residential construction can take as much as 60% of total construction cost.
That’s a lot of float that the builder gets to play with.
Finance is only needed till a project sells out to a level where it becomes self sustaining.
PEL isn’t funding construction as much as buying time for a builder so that he can find buyers for his unsold inventory and then he can repay PEL and other lenders.
Successful projects have a public perception of being fully sold out or few units left. The reality can be that a builder is struggling to keep lenders at Bay while carrying unsold inventory.
Now the problem is in almost all markets if something isn’t selling than lowering the price is the rational choice.
Unfortunately this goes against rule #1 of Indian real estate that you never lower prices come what may.
If prices are lowered, builders face unbearable heat from some big investors and they also cause a stampede like effect of sellers wanting to get out in surrounding projects.
No one has ever repealed the laws of supply and demand - Jim rogers.