Overleveraged developers have left nearly half a million apartments unfinished after decadelong building spree ends in a bust

India's 'ghost towns' saddle middle class with debt and broken dreams

Stuck home buyers in the hundreds of “ghost towns” now dotting the outlying areas of New Delhi, Mumbai and other urban centers face a situation that some here liken to America’s much larger subprime crisis. Builders have run out of money and can’t get new loans.1 People who put down payments have waited through years of delays and court cases and still may not ever get their homes or refunds.

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  • 1. 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.
Construction of Wish Town, a development meant to house 200,000 people in the New Delhi suburb of Noida, stopped in 2016
Construction of Wish Town, a development meant to house 200,000 people in the New Delhi suburb of Noida, stopped in 2016 - 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. ... 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 supposed to be built in three years ended up taking five years or more. Then, funding for projects dried up, as banks and shadow banks cut back amid growing piles of soured real-estate and infrastructure loans. This forced more delays and even the mothballing of many projects.  .... © PRASHANTH VISHWANATHAN/BLOOMBERG NEWS