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

Banks have advanced loans of Rs 1,000 crore to real estate firms by banks, NBFCs and housing finance companies (HFCs) which are under severe financial stress and and facing issues of debt servicing, according to a report. HFCs accounted for the la...

PTI|
Dec 02, 2019, 07.19 PM IST
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New Delhi: Loans worth USD 14 billion (about Rs 1,000 crore) 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 per cent or about USD 58 billion of the total loan advances (USD 93 billion) to Indian real estate by banks and NBFCs/HFCs is currently completely stress-free," Anarock said in a statement.

Another 22 per cent (about USD 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.

"USD 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.
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