Hundreds of unfinished housing
projects, like this one in Noida in
January 2018, dot the outlying areas
of India’s major urban centers.
Many have cut back spending on
everything from cars and clothes
to flights and eating out. This has
contributed to the recent drop
in consumption behind India’s
economic slowdown, with the
government predicting growth will
fall to less than 5% in the fiscal year
ending March 31, its lowest in more
than 10 years. Deborah Tan, an
assistant vice president at Moody’s
Investors Service, said Indian
consumers have given up hoping for
the economy to turn around and are
tightening their belts—one reason
the rating firm downgraded its
outlook for India to negative from
stable in November.
Delivering on the hopes of the
middle class has emerged as one
of the biggest challenges for Prime
Minister Narendra Modi. The
middle class, which most analysts
say could be more than 100 million
people, has backed him strongly
in two elections, and he regularly
mentions the plight of stuck home
buyers in his speeches. New Delhi
last month announced a $3.5
billion fund to jump start the viable
projects, although many economists
say the amount isn’t enough.
The housing crisis reflects the
sea change that has taken place
in India’s financial industry amid
liberalization efforts to meet the
needs of a fast-growing economy.
Two decades ago it was close to
impossible for most people to get
a mortgage, and red-tape made
it difficult and unprofitable for
developers to attempt large projects.
Even the best-paid usually had to
save until near retirement before
they could afford a home.
When market liberalizations in
the early 2000s made it easier to
raise money on the stock market
and with loans, as well as to obtain
home mortgages, buyers and
builders went overboard. Across
the country there was an explosion
in new apartment construction.
Complexes with a total of five
million apartments and villas
were launched between 2009 and
2019 according to PropEquity,
a real-estate research company.
Real-estate loans at India’s banks,
as well as at nonbanking finance
companies known as shadow banks,
quadrupled to more than $70
billion.
The developers, though,
quickly ran into problems getting
government clearances and finding
enough workers to build their
projects. Apartments that were
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