Developers Project Finance

Loan sanctioned to construct or develop a new real estate project including both residential as well as commercial is known as Loan for New Construction. An individual or a firm or company engaged in the business of real estate development or construction (Builder) can avail this loan.
Banks or other lending institutions prefer a builder having some reputation and background of quality construction to grant this loan. Lenders expect the builder to be in business for at least 2-4 years. The previous FINANCIAL statements and the cash flow statements are the key documents based on which the lenders decide the limit to what the loan is to be sanctioned. The maximum limit of loan to be sanctioned may vary from lender to lender depending upon internal policies. Besides the FINANCIAL statements the lending institutions also insist upon the original sale deed of the plot or land and subsequent documents, the profitability of the project, the monthly or quarterly cash flow (projected) detailed plan, layouts and estimates from chartered engineers or architects, approvals from the authorities like Municipal Corporation etc.
Builder has an option of repayment either in 3-5installments or lump sum after selling the developed premises. In addition builder may choose either floating or fixed rate of interest on the loan sanctioned. The rate of interest is determined by the prime lending rate practiced by the banks or lending institutions.
Real Estate is India’s rapidly developing business segment and multiple financial institutions including banking and non banking are offering Loans for New Construction Project finance is the long-term financing of infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of its sponsors. Usually, a project financing structure involves a number of equity investors, known as ‘sponsors’, as well as a ‘syndicate’ of banks or other lending institutions that provide loans to the operation. They are most commonly non-recourse loans, which are secured by the project assets and paid entirely from project cash flow, rather than from the general assets or creditworthiness of the project sponsors, a decision in part supported by financial modeling. The financing is typically secured by all of the project assets, including the revenue-producing contracts. Project lenders are given alien on all of these assets and are able to assume control of a project if the project company has difficulties complying with the loan terms.

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