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Realtors, PEs borrow by showing rent as cash flow

The latest loan of Rs 2,250 crore was picked up by Blackstone for the Indiabulls property at an interest rate of 8.28 per cent. SBI provided the entire amount.

, ET Bureau|
Last Updated: Mar 19, 2020, 08.36 AM IST
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Real estate
But within that, loans to the commercial real estate sector grew 12.3 per cent at the end of the January 31 period.
Mumbai: As banks turn riskaverse, the likes of Blackstone, Brookfield and K Raheja Corp have lapped up large lease rent discounting (LRD) loans, especially in the past 7-8 months. An analysis of loans of over Rs 500 crore suggests that at least nine private equity funds and builders have borrowed over Rs 15,000 crore from banks through LRD since May last year.

The most active in this space are HDFC, SBI, Axis Bank and Canara Bank, data compiled by Propstack, a real estate and financial data intelligence provider shows.

“We observe that there has been an uptick in LRD activity in the past one year — especially the large-ticket LRDs which are driven by LRDs taken by Blackstone (for its Indiabulls asset), Brookfield and K Raheja which may utilise this money for new acquisitions and improving existing assets,” said Sandeep Reddy, cofounder, Propstack.

“We also feel that lenders are aggressive about LRDs in the current lending environment indicating that lenders want to be safer with interest rates hovering around the 9-9.5 per cent mark.”

Lease rental discounting is a tool to acquire loans from banks using rental receipts as collateral. The bank will examine long-term cashflow and provide the loan based on the exact amount. This loan is then payable by the rents promised.
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The latest loan of Rs 2,250 crore was picked up by Blackstone for the Indiabulls property at an interest rate of 8.28 per cent. SBI provided the entire amount. K Raheja Corp also borrowed nearly Rs 1,347 crore at an interest rate of 9.35 per cent from HDFC for a property in Navi Mumbai.

Private equity major Brookfield picked up three loans from HDFC in September last year against properties in the NCR region. These loans totaled nearly Rs 5,000 crore at an interest rate of 9.35 per cent. Others who have picked up such loans are Hiranandani Developers, the Wadhwa Group, Mantri developers, ASF Infra, RMZ Corp and Bharti Realty.

Bank credit growth declined to 8.5 per cent in January from 13.5 per cent in the year-ago period led by a sharp slowdown in loans to the services sector. But within that, loans to the commercial real estate sector grew 12.3 per cent at the end of the January 31 period.

ET had recently reported that real estate loans worth Rs 20,000 crore may come up for restructuring after the Reserve Bank of India had recently allowed all banks and housing finance companies to defer the classification of troubled builder loans as bad for one year giving the beleaguered industry more time to restructure its loans.

This measure, coupled with the set-up of Rs 25,000 crore real estate alternate investment fund (AIF), is expected to ease the asset quality pain. at least in the near term.

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