Loans of USD 14 billion to builders under severe stress may result in default: report

New Delhi, December 2 () Loans worth USD 14 billion (around Rs 1,000 million rupees) granted to real estate firms by banks, NBFCs and housing finance companies (HFCs) are under severe stress and They face debt service problems, according to a report.

More than 62 percent or about USD 58 billion of total loan advances (USD 93 billion) to Indian real estate by banks and NBFC/HFC are currently completely stress free, Anarock said in a release.

Another 22 percent (about USD 21 billion) is under some pressure, but can potentially be resolved. The stress in this segment is mainly due to interest recovery and not the amount of capital.

USD 14 billion (or only 16 percent) of general loans for Indian real estate is under 'severe' stress, which means that interested developers have had high leverage that has limited or extremely visible visibility. Poor debt service due to combination of factors, said the consultant.

HFCs accounted for most of the total real estate loans, equivalent to 38 percent, followed by banks with a participation of almost 34 percent, while NBFCs (non-bank financial companies) have a 28 percent stake ( including loans granted under trusts). Of these, banks and HFCs are much better placed with 70 percent and 65 percent of their loan portfolio in a comfortable position. However, it is also not surprising that almost 58 percent of the total NBFC (non-bank financing company loans) are on an observation list, he said. MJH HRS