Debenture default triggers panic in sector
Many well-to-do investors who have invested money into real estate bonds to get higher returns from a secured investment have been taken aback due to a default in a property debenture since the turbulent days of 2008-09.
A month-and- a half ago, a Bangalore based realtor, failed to pay the interest rate on time. While the company is trying to sort out the issue with investors, the development has gone down in the market due to cash-flow problems, many developers are struggling amid a slowdown in sales.
Approximately, Rs 12,000 crores have been raised by developers from Bangalore, Mumbai and Delhi in past three years through private placement to high net-worth individual ( HNI) investors, corporate treasuries and finance companies.
As banks turned selective, primary market issuance to these investors emerged as a quick fundraising option. L&FS, the debenture trustee for the issuance, has taken legal action as per the trust deed. Each debenture had a face value of Rs 1 crore.
A Kotak Group spokesman said that IL&FS has kept investors informed about all its action. They have taken legal action for enforcement of security to recover all investors’ money.
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Bangalore, debenture, debenture trustee, high net-worth individual, Interest rate, property market, real estate bonds, Real Estate Developers
