Real-estate developers receive aid from smaller NBFCs/HFCs
Real Estate

Real-estate developers receive aid from smaller NBFCs/HFCs

Smaller non-banking finance companies (NBFCs), which include housing finance companies (HFCs), have stepped up funding to the real-estate sector at a time when bigger players are reluctant. As reported, research conducted by JLL has shown that these companies have lent about Rs 40 billion in the six months after the NBFC crisis.

The developers displayed higher dependence towards NBFCs/HFCs after banks reduced their exposure in the real-estate sector. The structuring of payments along with low cost of funds increased the popularity of NBFCs. Reportedly, from FY 2017-18 to FY 2011-12 the outstanding credit offered by these companies to developers saw an increase of more than 3.5 times to a total of Rs 2,330 billion.

Before the default crisis, the share of the large NBFCs was 50-60 per cent of total lending to real-estate developers. This, however, came to a standstill when the crisis hit as the companies were keener on recovering dues. This was followed by a reorganisation of the asset portfolio, which consisted of lower lending in the sector. 

The NBFC problem still persists but the smaller and medium entities have tried to make up the gap in the market. There has been an active inflow of Rs 0.3-0.7 billion being lent following the brief halt after the crisis. The lending ticket size has, however, considerably decreased from the previous Rs 1.5 billion-and-above mark.

The latest Union Budget seeks to create a provision of Rs 1 trillion, one-time partial credit guarantee to public-sector banks (PSBs). This will enable PSBs to purchase high-rated pooled assets of financially sound NBFCs with provision for the first loss up to 10 per cent. This move will help restore confidence and is likely to iron out the current challenges for the NBFCs and, in turn, help the real-estate sector.

According to Ramesh Nair, CEO & Country Head, JLL India,“NBFCs are likely to face challenges for the next few quarters. The impact of the Government’s measure will take some time to yield results. As a result, NBFCs will witness recovery towards the beginning of the year 2020.”

Smaller non-banking finance companies (NBFCs), which include housing finance companies (HFCs), have stepped up funding to the real-estate sector at a time when bigger players are reluctant. As reported, research conducted by JLL has shown that these companies have lent about Rs 40 billion in the six months after the NBFC crisis.The developers displayed higher dependence towards NBFCs/HFCs after banks reduced their exposure in the real-estate sector. The structuring of payments along with low cost of funds increased the popularity of NBFCs. Reportedly, from FY 2017-18 to FY 2011-12 the outstanding credit offered by these companies to developers saw an increase of more than 3.5 times to a total of Rs 2,330 billion.Before the default crisis, the share of the large NBFCs was 50-60 per cent of total lending to real-estate developers. This, however, came to a standstill when the crisis hit as the companies were keener on recovering dues. This was followed by a reorganisation of the asset portfolio, which consisted of lower lending in the sector. The NBFC problem still persists but the smaller and medium entities have tried to make up the gap in the market. There has been an active inflow of Rs 0.3-0.7 billion being lent following the brief halt after the crisis. The lending ticket size has, however, considerably decreased from the previous Rs 1.5 billion-and-above mark.The latest Union Budget seeks to create a provision of Rs 1 trillion, one-time partial credit guarantee to public-sector banks (PSBs). This will enable PSBs to purchase high-rated pooled assets of financially sound NBFCs with provision for the first loss up to 10 per cent. This move will help restore confidence and is likely to iron out the current challenges for the NBFCs and, in turn, help the real-estate sector.According to Ramesh Nair, CEO & Country Head, JLL India,“NBFCs are likely to face challenges for the next few quarters. The impact of the Government’s measure will take some time to yield results. As a result, NBFCs will witness recovery towards the beginning of the year 2020.”

Next Story
Infrastructure Transport

Railways To Add 2,000 Trains, End Waiting Lists

Indian Railways will introduce about 2,000 extra trains a day over the next four years, lifting the daily total to nearly 13,000 services and aiming to provide every traveller with a confirmed berth. According to a senior Railway Ministry official, the enlarged timetable should raise annual passenger capacity from roughly 8 billion to 10 billion and wipe out the 50 million-strong waiting-list that recurs each year.The plan calls for 450 Vande Bharat sets, 200 push-pull formations and a mix of new Mail and Express services. Capacity freed by the Dedicated Freight Corridor, plus continuous track..

Next Story
Infrastructure Transport

Six Ahmedabad Trains Rerouted For 70-Day Station Upgrade

Western Railway will divert six long-distance services from Ahmedabad’s Kalupur station for 70 days while the hub undergoes major redevelopment. From 5 July until 12 September 2025, the following changes will apply:The 12932 Ahmedabad–Mumbai Central AC Double Decker will start from Maninagar at 05.50, the 12655 Ahmedabad–Chennai Navjivan Express will leave Asarva at 21.05, and the 19034 Ahmedabad–Valsad Gujarat Queen will depart Maninagar at 18.20.Arriving trains will also finish elsewhere: the Mumbai Central–Ahmedabad AC Double Decker will terminate at Vatva at 21.20, the Chennai–..

Next Story
Infrastructure Energy

LTTS Wins USD 50 Million Five-Year Sustainability Deal

L&T Technology Services (LTTS), the listed engineering arm of Larsen & Toubro, has secured a five-year framework agreement worth more than USD 50 million to serve as the exclusive global engineering partner for the Sustainability division of one of the world’s leading energy companies.Under the pact LTTS will deliver enterprise data and digital services, encompassing advanced power-management solutions, next-generation cooling, and scalable rack architectures designed to optimise the client’s worldwide network of AI-enabled, low-carbon “energy factories”.Chief Executive and Man..

Advertisement

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Advertisement

Talk to us?