India Markets closed

‘$14 bn loans to builders under severe stress, may result in default’

New Delhi: Loans worth USD 14 billion (about Rs 1,000 crore) provided to real estate firms by banks, NBFCs and housing finance companies (HFCs) are under "severe stress" and facing issues of debt servicing, says a report.

"Over 62% or about USD 58 billion of the total loan advances (USD 93 billion) to Indian real estate by banks and NBFCs/HFCs is currently completely stress-free," Anarock said in a statement.

Another 22% (about USD 21 billion) is under some pressure but can potentially be resolved. The stress on this segment is largely on recovery of interest and not on principal amount.

"USD 14 billion (or merely 16%) of overall lending to Indian real estate is under 'severe' stress, meaning that there has been high leveraging by the concerned developers who have either limited or extremely poor visibility of debt servicing due to a combination of factors," the consultant said.

HFCs accounted for the largest share of total realty loans equalling 38%, followed by banks at nearly 34% share while NBFCs (non-banking financial companies) have 28% share (including loans given under trusteeships).

Also Read: Gross Value Added, manufacturing in free fall