$14 bn loans to builders under severe stress, may result in default: Report

“Over 62% or about $58 billion of the total loan advances ($93 billion) to Indian real estate by banks and NBFCs/HFCs is currently completely stress-free,” Anarock said in a statement

Loans worth $14 billion provided to real estate firms by banks, NBFCs and housing finance companies (HFCs) are under “severe stress” and facing issues of debt servicing, according to a report.

“Over 62% or about $58 billion of the total loan advances ($93 billion) to Indian real estate by banks and NBFCs/HFCs is currently completely stress-free,” Anarock said in a statement. Another 22% (about $21 billion) is under some pressure but can potentially be resolved. The stress on this segment is largely on recovery of interest and not on principal amount.

“$14 billion (or merely 16 per cent) of overall lending to Indian real estate is under ‘severe’ stress, meaning that there has been high leveraging by the concerned developers who have either limited or extremely poor visibility of debt servicing due to a combination of factors,” the consultant said.

HFCs accounted for the largest share of total realty loans equalling 38 per cent, followed by banks at nearly 34 per cent share while NBFCs (non-banking financial companies) have 28 per cent share (including loans given under trusteeships).

“Of these, banks and HFCs are much better placed with 70 per cent and 65 per cent of their lending book in a comfortable position. However, it also comes as no surprise that nearly 58 per cent of the total NBFC (non-banking financial company) lending is on a watchlist,” it said…Read More

Rs 25,000-cr boost for realty: Govt sets up fund to revive stalled projects

Targeted at affordable and middle-income housing units, the fund will address residential properties in Mumbai that are priced below Rs 2 crore

The Union Cabinet on Wednesday approved the setting up of a Rs 25,000-crore alternative investment fund (AIF) to revive around 1,600 stalled housing projects across top cities in the country. The AIF will be a special window to provide priority debt financing for completion of projects in the affordable and middle-income categories, Finance Minister Nirmala Sitharaman said after the Cabinet meeting.

In a move expected to bring significant relief to homebuyers as well as businesses, the government has decided to include projects declared as non-performing assets and those which are undergoing insolvency at the National Company Law Tribunal (NCLT) to be considered for financing from the AIF. The funding will be possible only if they are registered under the Real Estate (Regulation and Development) Act or RERA.

However, those which have already got orders from NCLT for liquidation will not be considered. The Cabinet decision is a modification of an earlier stimulus package announced by the FM in September, when she had kept NPA and insolvency projects out of the AIF purview.

The inclusion of projects under NPA and NCLT proceedings would help cover almost 80 per cent projects in some of the key property markets such as NCR and Mumbai, according to Samir Jasuja, founder at Propequity, a real estate research firm…