11% of loan to developers in Chennai under severe stress, says study

Severe stress implies high leveraging by developers with poor visibility of debt servicing, the study said

December 23, 2019 04:25 pm | Updated 04:25 pm IST - CHENNAI

Out of loan advances of $2.8 billion received by developers in Chennai, only 11.07% or $310 million is under severe stress, according to an analysis by ANAROCK Property Consultants Pvt. Ltd.

Severe stress implies high leveraging by developers with poor visibility of debt servicing, it said. According to Anarock, of total ‘severely stressed’ loans of approx. $14 bn in Indian real estate,

The Mumbai Metropolitan Region (MMR) and National Capital Region (NCR) accounts for a 91% share. Overall loan advances given to builders in MMR is $35 billion and in NCR is over $23 billion respectively, it said.

Bangalore received total loan advances of $16 billion, but has amere 1% ($160 million) under ‘severe’ stress, the analysis said.

Pune, Hyderabad & Kolkata each received realty loan advances worth $3.7 billion, of which merely $370 million is collectively under ‘severe’ stress, according to the study.

“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 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,” Shobhit Agarwal, MD & CEO - ANAROCK Capital said.

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