Real estate sector loans worth $18 bn under severe stress: Anarock

Property consultant Anarock, however, said in its report that at least 67 per cent or about $67 billion of the total advances to the sector is now completely stress-free.

Around USD18 billion loans of the overall lending to the real estate sector by banks, NBFCs and housing finance companies (HFCs) are under 'severe' stress, a report released by a consulting firm said on Monday.

Property consultant Anarock, however, said in its report that at least 67 per cent or about USD 67 billion of the total advances to the sector is now completely stress-free.

COVID-19 has had a cascading impact across sectors, and severely stressed' loan levels in Indian real estate industry were expected to go up substantially. However, the construction sector particularly the residential segment - has fared better than anticipated.

"Towards 2019-end, at least 16 per cent of the total real estate loan of around USD 93 billion was severely stressed. Despite the devastation of the pandemic over the last year, only 18 per cent of the total USD 100 billion loan value falls under this category. This is far better than other major sectors such as telecom and steel, Anarock Capital MD and CEO Shobhit Agarwal said.

The consulting firm expects that another USD 15 billion loans are under "some pressure but has scope for resolution.

Non-banking finance companies and HFCs together account for 63 per cent of the nearly USD 100 billion outstanding loan portfolio of the sector, while banks' contribution is at 37 per cent, the report said.

Agarwal said at least 75 per cent of total advances to grade 'A' developers is safe, and a large portion of loans to grade 'B' and 'C' real estate players needs monitoring.

Grade 'A' developers are companies that are currently active with a good execution track record and have developed real estate of more than 3 million sq ft till date.

Grade 'B' players include those who are currently active with an established execution track record and having a developable area of more than 1 million sq ft but less than 3 million sq ft, while grade 'C' comprises developers with less than 1 million sq ft developable area.