Tight credit and small bonuses hit real estate

The giant cranes that once worked long into the Mumbai night are still, the roar of concrete mixers has dulled, and hundreds of migrant Realty hit workers have gone home.

A slowing economy, high interest rates, tighter credit and a falling stock market have left developers in India’s financial hub scrambling for cash and delaying or canceling ambitious commercial and residential projects.

The Mumbai skyline has been transformed in recent years as developers rushed to build gleaming office blocks, swanky apartment towers and sprawling malls.

Land prices quadrupled in some areas in the last three years, and commercial and residential spaces in Mumbai have become among the world’s most expensive.

Rising incomes, low interest rates, a soaring stock market and foreign investment fueled the boom. Now, some fear a bust.

“Besides the liquidity crunch, there is a real crisis of confidence,” said Anshuman Magazine, managing director for south Asia at real estate consultancy CB Richard Ellis.

Land and property prices could fall by between 15 and 50%, with some distress sales expected in the months ahead, analysts say, with a sustained slump having a serious impact on the already stretched infrastructure of the city and the country.

With half India’s wealth tied to property, according to CLSA estimates, the potential impact on banks and the economy is big.