Real Estate: Only 16% of Loans to Indian Real Estate is under “Severe Stress,” Says Report

January 14, 2020 | News, Real Estate
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This statistic in a new report from ANAROCK Capital should be heartening news for beleaguered Indian real estate.

Indian real estate, the poster-child for everything wrong with the Indian economy, may have been treated unfairly.

Consider this from an article last month:

“The real estate sector is caught in the tweezer grip of delayed project deliveries; developers starved of funds, high unsold inventory, and a growing proportion of stalled projects. Unproductive assets in the form of under-construction, stuck or delayed projects are estimated at 560,000 homes worth ₹4.5 trillion ($65 billion) across the top seven Indian cities.”

The headline numbers, therefore, look scary and paint a picture of a sector gripped by a severe financing crunch.

In this context, an in-depth look by ANAROCK Capital at the status of real estate financing in India paints a markedly optimistic picture.

Indian real estate financing: ANAROCK Capital’s report

Key facts from the blog by Shobhit Agarwal, MD & CEO, featured in the report:

  • Over 62% or ~USD 58 Bn of the total loan advances (USD 93 Bn) to Indian real estate by banks and NBFCs/HFCs is currently completely stress-free
  • Another 22% (~USD 21 Bn) is under some pressure. These will likely resolve.
  • Only USD 14 Bn (or merely 16%) of overall lending to Indian real estate is under ‘severe’ stress
  • Out of the above total of USD 93 Bn of loans to Indian real estate, Grade A builders received over USD 65 Bn loan advances, followed by USD 27 Bn to Grade B players – and a mere USD 1 Bn to Grade C developers.
  • Nearly 84% of the overall loan amount by NBFCs/HFCs has little or no stress at all.
  • Going forward, residential sales are likely to pick up as the government is taking multiple measures to revive the sector.

So the cash crunch on Indian realty may lift sooner than what the market envisages.

The Nifty Real Estate Index has likely already broken out of a 10-month consolidation and maybe a harbinger of better fortunes down the line.

(This article is the first part of a two-part article on the Anarock report. The second part will cover the PE trends in the Indian Real Estate sector)

Related Story:  Alternative Investments: CPPIB Commits $600 Million to Indian Infrastructure

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