Chennai/Kolkata: Around $35 billion, or 38 per cent, of the total loan advances to the real estate sector is under stress, of which $14 billion is reeling under ‘severe stress” and facing difficulties in debt servicing.
However, over 62 per cent, or nearly $58 bn, of the total loan advances of $93 bn to the real estate sector by banks and NBFCs/HFCs is currently completely stress-free. Another 22 per cent, or nearly $21 bn, is under some pressure but can potentially be resolved.
Those under ‘severe’ stress have either limited or extremely poor visibility of debt servicing due to a combination of factors, says an Anarock Capital report. The entire ‘severe stressed’ loan value in real estate is spread across more than 50 developers.
“The ‘stress’ loan amount in real estate is not as bad as seen in other major sectors like telecom and steel. For instance, the entire ‘severe stressed’ loan value in real estate is spread across more than 50 developers. In the telecom or steel industries, default by a single company alone equals a sizable portion of the overall stress in the real estate sector. Also, every real estate loan is backed by hard security, which is anywhere between 1.5 times to 2 times. Even if the loan is NPA, there is enough security for the lenders to get a significant portion of their money back. Even if defaulting developers decide to sell their real estate at a discount, there is enough margin for them to pay back,” said Shobhit Agarwal, MD & CEO, Anarock Capital.
Among the lenders, hosuing finance companies, or HFCs, account for the largest share or 38 per cent of total realty loans. Banks have nearly 34 per cent share and non-banking finance companies (NBFCs) account for 28 per cent. The majority of the loans, or nearly 58 per cent, of the total NBFC lending is on a watchlist. Compared to NBFCs, banks and HFCs are better placed with 70 per cent and 65 per cent of their lending book in a comfortable position.
In absolute terms, $12.35 billion stressed assets of HFCs is slightly lower than $15.1 billion of NBFCs. Banks have stressed assets of $9.49 billion.
Out of the total $93 billion loans, Grade A builders account for over $65 billion and $27 billion has gone to Grade B players....