Connect with us

Main

Rs 30k cr of realtors’ debt faces high refinancing risk

indianRupeeIdentity04big

As much as Rs 30,000 crore of debt obligations of 25 real estate companies, mostly based in the National Capital Region, will face high refinancing risk with demand expected to be tepid over the medium term, rating agency Crisil has said.

Stagnating collections in the wake of declining sales velocity had resulted in debt taken for residential projects by these developers surging by 25 per cent to Rs 61,500 crore in fiscal 2015, Crisil said in an analysis of top 25 realtors, comprising 95 per cent of the market capitalisation of the sector.

“The past two years have seen realtors refinancing principal and interest obligations, some by leveraging the cushion available in their operational commercial portfolio. Add to that the problem of construction cost outpacing customer advances lately, and developers seem to be caught in a debt spiral,” Crisil said.

According to Crisil, recent regulatory measures such as relaxation in foreign direct investment, and recourse to funding through non-convertible debentures (NCDs) and private equity, are expected to provide some respite in the short term for the sector. The flipside is the high returns expected by private equity investors compared with the relatively low cost of bank loans.

Sushmita Majumdar, Director, Crisil Ratings, was quoted in the media reports as saying, “These 25 developers account for half of bank lending to the real estate sector. And most of those facing high refinancing risk are in the NCR. With net exposure of banks expected to decline by 5 per cent for the first time in the current fiscal — banks used to meet 90 per cent of the requirements of these realtors till last year — an increasing proportion of the funding gap is being bridged by costlier NCDs and private equity monies.”

Advertisement

Latest News

News2 hours ago

UP Real Estate Appellate Tribunal’s “Online Justice Delivery System” awarded for Innovative Technology for Smart Governance by Computer Society of India

U.P. Real Estate Appellate Tribunal’s “Online Justice Delivery System” has been awarded for Innovative Technology for Smart Governance and selected...

News18 hours ago

52% NRIs see Indian commercial properties emerging as a new asset class

The Indian real estate segment demonstrates an upward trajectory with the projection to exhibit a growth rate of 9.2% CAGR...

Guest Column1 day ago

Welspun Gp acquires Sintex BAPL

Mumbai, March 30, 2023: Welspun Group has acquired the plastic industry market leader, Sintex.  Sintex’s auto business already has a...

New Launches1 day ago

Naiknavare Developers launches Avasa, new vertical of structured plots; commences e-commerce platform designed for plotting

Pune, March 30, 2023: Naiknavare Developers, renowned for its well-thought-out community-centric residential and commercial projects in Pune, Mumbai, and Goa, today announced it...

News1 day ago

Residential demand up 14.2%, supply grew 1.9% YoY: Magicbricks PropIndex Report, Jan-Mar’23

New Delhi/Noida, March 30, 2023: Continuing on the path of resilience and overall growth, India’s residential demand increased 14.2% and...

News1 day ago

Mahindra Life transacts with Alliance Gp for 9.24 acres at Mahindra World City, Chennai

New Delhi, March 29, 2023: Mahindra Lifespace Developers Ltd. (MLDL), the real estate and infrastructure development business of the Mahindra...

Trending