Construction Finance and NBFCs

How developers borrow from banks, NBFCs and private funds, how the IL&FS crisis in 2018 cut off lending, and the rise of private equity and SWAMIH funds.

Developers borrow to buy land and build.

Sources

Banks, which are cautious about land loans.
NBFCs and housing finance companies, which lent heavily in the 2010s.
Private equity and credit funds.

The 2018 crunch

The IL&FS default in 2018 froze NBFC lending, and developers dependent on NBFCs faced a cash crunch; firms like DHFL later collapsed.

SWAMIH Fund

In 2019, the government set up the SWAMIH fund to finance completion of stalled affordable and mid-income projects.

Private equity

Global investors like Blackstone and sovereign funds invest in offices and housing platforms.

Cost of money

Smaller developers pay high interest rates, a competitive disadvantage.

The last-mile loan

A stalled project with most flats built gets SWAMIH funding to finish, letting buyers finally move in.

Thinking developers fund projects only from profits

Borrowing is central.

Key takeaways

Developers borrow from banks, NBFCs and funds.
The 2018 IL&FS crisis cut credit.
SWAMIH finances stalled projects.
Smaller developers pay more to borrow.