According to Anarock Capital, about 67% of real estate loans go through stress-free.



MUMBAI: According to a study by Anarock Capital, at least 67%, or $ 67 billion, of total loans to the Indian real estate sector by banks, non-banks and mortgage lenders are not currently stressed.

Another 15%, or about $ 15 billion, is under some pressure but can be settled with confidence, at least on the principal amount, it said. However, the study found that $ 18 billion of total lending is under severe stress, which means that interested developers have used high lending resources that have either limited or extremely poor visibility of debt service due to a variety of factors.

“Covid-19 has had a cascading effect across all sectors and India’s severely stressed real estate loan levels are expected to rise substantially. However, in real estate – especially in the residential segment – things are doing better than expected, ”said Shobhit Agarwal, managing director and chief executive officer of Anarock Capital.

By the end of 2019, of a $ 93 billion total real estate loan, at least 16% were under severe stress. Despite the devastating pandemic over the past year, Agarwal said only 18% of the $ 100 billion in total loans falls into this category, and this is definitely much better than other large sectors such as telecommunications and steel.

“Moreover, the entire amount of a real estate loan subject to severe stress is distributed among more than 50 developers. In the telecom and steel industry, one company’s default is a significant part of the overall stress in the real estate sector. In addition, each real estate loan is secured by reliable collateral, which ranges from 1.5 to 2 times, ”he added.

According to Anarock, the total contribution of non-bank finance companies (NBFCs) and home finance companies (HFCs), including trusteeship, to total Indian real estate lending is 63%. Banks individually accounted for the largest share of total real estate loans at 37%, followed by PFIs with approximately 34% and NBFCs with 16%, with 13% of loans issued under guardianship.

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