The caution among financiers over real estate funding has now started affecting the commercial property segment too, hitherto considered safe. Increasingly, financing by banks to commercial real estate projects of developers has been more conservative compared to last year.This has worsened the already low liquidity for realtors across the country and builders are looking out for alternative sources of financing. Banks have become more selective in choosing projects they want to invest in as the sector continues to reel under economic slowdown.Bankers are now exercising extra caution in loan disbursements by seeking additional documents and collateral as well as reviewing existing limit both on fund and nonfund based lines of credit. “Earlier, it would take maximum 30 days to get lease rental discounting approved but now it’s not less than 60-90 days. There are multiple levels of approvals that are taken before money is being disbursed,” said Jitu Virwani, MD of Embassy Group.Embassy is raising Rs 4,000 crore by divesting commercial assets. “There is so much turmoil in the industry. Our intent is to keep liquid cash as there are opportunities to invest in others projects or companies too,” said Virwani.Builders of commercial real estate are witnessing delays in loan approval and disbursal given its high-risk nature. Lending by banks is the cheapest form of credit for real estate firms, who rely on it primarily for working capital.“Banks have turned very cautious as to who they are lending to even if it’s backed by a stream of income flow. We can certainly see a massive flight to safety as financiers have become quality conscious. It would take some more time before it comes back to normalcy,” said the managing director of a private equity firm with large exposure to real estate.The real estate sector in India is faced by a severe liquidity crunch with the downturn in the residential property segment, with many builders struggling to repay loans to shadow lenders.“In both cases of retail mall and office complex, landlord’s relationship with tenants and ability to get rental escalation has become more crucial now as banks are turning more diligent. The conclusion and conversion ratio of lease rental discounting proposals has come down due to the cautionary pause hit by most lenders,” said Subhash Udhwani, founder of real estate-focused boutique investment bank Elysium Capital.According to Fitch Ratings, about $10 billion of development loans are coming up for repayment in the first half of 2020 and this may impact mainstream banks that disbursed money to shadow lenders or invested in their bonds.Defaults by two housing finance companies, Dewan Housing Finance Corp and Altico Capital, have only aggravated the financial stress.The outlook for Indian real estate in the quarter to September fell to the level previously seen during the heightened uncertainty of the pre-election period in 2014 and the demonetisation period of late 2016, found a jointl survey by industry lobby FICCI, National Real Estate Development Council (NARDECO) and realty consultant Knight Frank India.