According to a report issued by a consultancy company, over USD18 billion in loans to the real estate industry by banks, NBFCs, and housing finance companies (HFCs) are under 'severe' stress. However, property consultancy Anarock stated, at least 67% of overall loans to the industry, or roughly USD 67 billion, is now entirely stress-free.
COVID-19 had a cascade effect across sectors, with highly strained debt levels in the Indian real estate market anticipated to rise significantly. However, the construction industry has performed better than expected, notably in the residential sector.
"At least 16% of the entire real estate loan of about USD 93 billion was significantly stressed by the end of 2019." Despite the pandemic's destruction over the previous year, this group accounts for just 18% of the overall USD 100 billion loan value. According to Anarock Capital MD and CEO Shobhit Agarwal, this is significantly better than other key industries such as telecom and steel.
Another USD 15 billion debt, according to the consultancy company, is under "some strain but has scope for resolution." According to the study, non-banking financing businesses and housing finance companies account for 63% of the sector's roughly USD 100 billion outstanding loan portfolio, while banks provide 37%.
At least 75% of overall advances to grade 'A' developers are safe, according to Agarwal, but a substantial chunk of loans to grade 'B' and 'C' real estate companies requires monitoring.
Grade 'A' developers are firms who are actively operating, have a strong track record of execution and have built over 3 million square feet of real estate to date. Grade 'B' players are those that are actively operating, have a proven execution track record, and have a developable area of more than 1 million sq ft but less than 3 million sq ft, whereas grade 'C' developers have a developable area of less than 1 million sq ft.
Source: Business Standard