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Bangalore pips MMR & NCR in servicing realty loans, only US$ 160 mn under stress

  • Of total ‘severely stressed’ loans of approx. USD 14 bn in Indian real estate, MMR & NCR together hold a 91% share
  • Overall loan advances given to builders in MMR is USD 35 bn; in NCR it is over USD 23 bn
  • Bangalore received total loan advances of USD 16 bn, has a mere 1% (USD 160 million) under ‘severe’ stress
  • Pune, Hyderabad & Kolkata each received realty loan advances worth USD 3.7 bn, of which merely USD 370 mn is collectively under ‘severe’ stress
  • ‘Severe’ stress implies high leveraging by developers with poor visibility of debt servicing

Shobhit Agarwal, MD & CEO – ANAROCK Capital

 Of the total 35 bn loan advances given to developers in MMR, nearly USD 8.7 bn (or 25%) is currently under ‘severe’ stress.

This is exactly double of the total stressed loan amount in NCR (at USD 4.3 bn), finds ANAROCK’s latest research. The NCR real estate market has so far received total loans worth USD 23 bn from banks and NBFCs/HFCs.

Bangalore pips both these markets in terms of the existing stressed loans. Merely 1% (USD 160 million) of the total USD 16 bn of real estate loans in the city are in the ‘red alert’ category – the result of the better financial discipline of the city’s developers, lower demand/supply mismatch and range-bound property prices to ensure gradual rather than haphazard growth.

The liquidity crunch in the country’s top 2 real estate markets – MMR and NCR – is unrelenting. Both markets collectively have loans worth USD 13 bn under ‘severe’ stress with extremely poor prospects of recovery from the borrowing developers.

Previously, many developers engaged in high leveraging and also engaged in fund diversions. To compound the problem, housing sales have remained tepid over the last few years, resulting in depleted cash reserves.

Bangalore supersedes NCR and MMR markets in servicing its debt to banks, NBFCs or HFCs. The city has much better stress-level readings with over 70% (of the total USD 16 bn loans) completely stress-free. In NCR, the stress-free share is at 53% and in MMR, it is 58% of the total loan advances.

City-Wise Stress Analysis

Of the total real estate loan of USD 93 bn, NCRMMR and Bangalore together account for a whopping 80% share (USD 74 bn).

Of the overall loan amount extended to real estate, USD 14 bn (or 16%) is under ‘severe’ stress while nearly 62% (approx. USD 58 bn) is completely stress-free. The remaining 22% or USD 21 bn loan amount is under pressure but can potentially be resolved.

At the city-level, the two leading realty markets – NCR and MMR – have a 91% share of severely stressed loans totalling USD 13.2 bn. Hyderabad and Kolkata have hardly any stress – however, their share in the overall realty loan advances is also quite limited.

  • MMR received the maximum loans worth over USD 35 bn, of which nearly 25% or USD 8.7 bn is under ‘severe’ stress, while 58% is completely stress-free. Another 17% (close to USD 6 bn) is under pressure but can be resolved.
  • NCR received total loans of USD 23 bn, of which nearly 19% (nearly USD 4.3 bn) is under ‘severe’ stress category and approx. 53% is stress-free.
  • Bangalore received total real estate loans worth USD 16 bn, of which merely 1% or USD 160 million is in the ‘red alert’ category. A massive 70% of the total loan amount is entirely stress-free.
  • PuneHyderabad & Kolkata each received realty loans worth USD 3.7 bn, of which nearly USD 370 mn is under severe stress. Interestingly, no loan amount in Hyderabad is under severe stress.
  • Chennai received loan advances worth USD 2.8 bn, of which merely USD 310 mn is under severe stress.
  • Other smaller cities collectively received loans worth USD 4.7 bn, of which USD 470 mn fall in the red alert category.
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