Real-estate developers receive aid from smaller NBFCs/HFCs
01 Sep 2019
2 Min Read
CW Team
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,鈥淣BFCs are likely to face challenges for the next few quarters. The impact of the Government鈥檚 measure will take some time to yield results. As a result, NBFCs will witness recovery towards the beginning of the year 2020.鈥�
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,鈥淣BFCs are likely to face challenges for the next few quarters. The impact of the Government鈥檚 measure will take some time to yield results. As a result, NBFCs will witness recovery towards the beginning of the year 2020.鈥�
Next Story
GRSE Lands Rs 5.9 Billion Deal to Build Two Coastal Research Vessels
Garden Reach Shipbuilders & Engineers (GRSE) has secured a major contract to build two coastal research vessels (CRVs) for the Geological Survey of India (GSI). The award marks a major step forward in India鈥檚 efforts to enhance domestic marine research capabilities through indigenous shipbuilding.The contract, valued at approximately Rs 5.9 billion covers the design, construction and delivery of two advanced 62-metre vessels. GRSE is expected to complete the project within 36 months, as part of its expanding portfolio of mission-specific vessels.Each vessel will be powered by diesel-elec..
Next Story
NHAI Limits Project Allocation per Engineer to Ten
The National Highways Authority of India (NHAI) has announced a new policy limiting the number of active projects assigned to each engineer to a maximum of ten. The decision aims to enhance supervision, improve construction quality, and eliminate delays across the national highway network.Rapid infrastructure expansion has increased the workload on NHAI鈥檚 engineering teams, leading to uneven oversight. Under the new directive, no engineer will be responsible for more than ten projects simultaneously, ensuring focus and detailed attention to each assignment.By reducing the project load per en..
Next Story
AVP Infracon Bags Rs鈥�162鈥痬illion ROB Contract in Tamil Nadu
AVP Infracon Limited has secured an Rs鈥�162鈥痬illion contract to build a new road鈥憃ver鈥慴ridge (ROB) on Thaneerpandal Road in Tamil Nadu. The project will replace a level crossing between Singanallur and Peelamedu railway stations, aiming to reduce traffic congestion and improve commuter safety.The ROB will be constructed at kilometre 0.6 of Thaneerpandal Road and is scheduled for completion within eighteen months. The structure will be designed in full compliance with approved engineering standards and constructed by the company鈥檚 in鈥慼ouse workforce using its technical expertise.With..
