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Triggered by ILFS default, NBFC crisis may delay real estate's recovery

Now, NBFCs are struggling and their loan disbursals to developers have slowed down significantly

Press Trust of India  |  Kolkata 

infra, realty, buildings, real estate

Besides the financial sector, the may also face the heat due to the ongoing crisis in NBFC sector, triggered by IL&FS default.

"As on March 2018, NBFC's exposure towards is 7.5 per cent accounting for Rs 1.65 trillion," consultant Anarock Capital MD & Shobhit Agarwal said.

"Post the systems freeze on real estate funding due to rising non-performing assets, and HFCs are the sole source of funds for the cash-strapped developers," he said.

The NBFC crisis needs to be resolved as soon as possible or the real estate sector's much-anticipated recovery will be postponed by a couple of quarters, Agarwal said.

Now, are struggling and their loan disbursals to developers have slowed down significantly, he said.

The repayment burden is about 1.2 trillion (USD 16.3 billion) of commercial paper in October-December, near a record 1.46 trillion in August-October, according to available data.

The consultant quoting report said and Housing Finance Companies (HFCs) have played a major role in credit supply in recent years, accounting for nearly 25-35 per cent of incremental overall credit.

While credit growth in the last two years averaged at a mere seven per cent, a strong 20 per cent-plus growth in NBFC credit aided overall credit expansion beyond 10 per cent.

"Despite residential sales gradually picking up q-o-q, they are nowhere near their peak levels. With substantial number of residential projects running behind schedule, the crisis could further exacerbate liquidity woes and impact project delivery time lines even more," Agarwal said.

As per Anarock data, more than 575,000 residential units are running behind schedule across the top 7 cities since their launch in 2013 or before.

Many listed realty developers such as Puravankara, DLF, Prestige Group, and have well-diversified portfolios and many of these have also reduced their debts and ventured into affordable housing where growth is currently the highest, he said.

First Published: Wed, October 24 2018. 10:55 IST