“Interestingly, since 2013, the share of NBFCs and HFCs has grown considerably - at the expense of banks. However, in the past 4-8 quarters, banks have been more active than NBFCs,” the agency pointed out.
Around $18 billion (Rs 1.34 lakh crore), which is 18% of the overall lending to the Indian real estate sector is under severe stress, Anarock Property Consultants has said in its report.
“$18 billion (or 18%) of the overall lending to Indian real estate is under severe stress, implying that there has been high leveraging by the concerned developers who have either limited or extremely poor visibility of debt servicing due to multiple factors,” the real estate consultancy said in the report.
However, loans worth around Rs 5 lakh crore, or $67 billion, which is about 67% of the total loan advances of $100 billion (about Rs 7.44 lakh crore) to the sector are at present completely stress-free. Another 15%, or Rs 1.12 lakh crore, is under some pressure, but have scope for resolution with certainty on at least the principal amount, it added.
Anarock Capital MD & CEO, Shobhit Agarwal said Covid-19 has had a cascading impact across sectors and severely stressed loans levels in Indian real estate were expected to go up substantially. However, real estate, particularly residential, fared better than anticipated.
Towards 2019-end, of the total real estate loan of $93 billion (around Rs 6.92 lakh crore), at least 16% (Rs 1.11 lakh crore) was severely stressed. Despite the devastation of the pandemic over the last year, only 18% of the total $100 billion loan value falls under this category. It is far better than sectors like telecom and steel, he noted.
“Moreover, the entire severely stressed loan value in real estate is spread across more than 50 developers. In telecom and steel, default by a single company equals a sizeable portion of the overall stress in real estate. Also, every real estate loan is backed by hard security, which is anywhere between 1.5 to 2 times. Even if the loan is NPA, there is enough security for the lenders to recover a significant portion of their money,” Agarwal added.
About 75% of the total lending to Grade-A developers is safe, Agarwal said adding “This presents a comfortable outlook because out of the total loans given to real estate, more than $73 billion (Rs 5.43 lakh crore) is given to Grade-A builders. Of this, $55 billion, or roughly Rs 4.10 lakh crore, is safe and under no stress”.
On the other hand, a high amount of realty loans given to Grade-B and C developers needs strict monitoring. Close to 55% of the loans given to Grade-B developers is under severe’ stress, while for Grade C developers, it is over 73%, he added.
Anarock said the overall contribution of NBFCs and HFCs (including trusteeships) towards the total lending to Indian real estate is at 63%. Individually, banks accounted for the largest share of total realty loans with 37%, followed by HFCs with around 34%, and NBFCs have 16% and 13% loans given under trusteeships.
“Interestingly, since 2013, the share of NBFCs and HFCs has grown considerably – at the expense of banks. However, in the past 4-8 quarters, banks have been more active than NBFCs,” the agency pointed out.