MMR-NCR loans: unlikely recovery

Of the total US$35 billion loan advances given to developers in MMR, nearly US$8.7 billion (or 25%) is currently under ‘severe’ stress, writes Shobhit Agarwal, MD & CEO – ANAROCK Capital.

This is exactly double of the total stressed loan amount in NCR (at US$4.3 billion), 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% (US$160 million) of the total US$16 billion of real estate loans in the city are in the ‘red alert’ category – the result of 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 US$13 billion 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 US$16 billion 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 US$93 billion, NCR, MMR and Bangalore together account for a whopping 80% share (US$74 billion). Of the overall loan amount extended to real estate, US$14 billion (or 16%) is under ‘severe’ stress while nearly 62% (approx. US$58 billion) is completely stress-free. The remaining 22% or US$21 billion 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 US$13.2 billion. 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 US$35 billion, of which nearly 25% or US$8.7 billion is under ‘severe’ stress, while 58% is completely stress-free. Another 17% (close to US$6 billion) is under pressure but can be resolved.

NCR received total loans of US$23 billion, of which nearly 19% (nearly US$4.3 billion) is under ‘severe’ stress category and approx. 53% is stress-free.

Bangalore received total real estate loans worth US$16 billion, of which merely 1% or US$160 million is in the ‘red alert’ category. A massive 70% of the total loan amount is entirely stress-free.

Pune, Hyderabad & Kolkata each received realty loans worth US$3.7 billion, of which nearly US$370 million is under severe stress.

Interestingly, no loan amount in Hyderabad is under severe stress.

Chennai received loan advances worth US$2.8 billion, of which merely US$310 million is under severe stress.

Other smaller cities collectively received loans worth US$4.7 billlion, of which US$470 million fall in the red alert category. Fiinews.com