Around 25% loans to MMR developers severely stressed: Shobhit Agarwal

New Delhi: Nearly 25 percent of loans provided to real estate developers in the Mumbai Metropolitan Region (MMR) is currently under severe stress, according to a survey by Anarock Capital. "Of the total $35 billion loan advances given to developers in MMR, nearly $8.7 billion (or 25 percent) is currently under 'severe' stress. This is exactly double of the total stressed loan amount in NCR (at $4.3 billion)," Shobhit Agarwal, Managing Director, and Chief Executive Officer, Anarock Capital, said on Sunday.

The NCR real estate market has so far received total loans worth $23 billion from banks, non-banking financial companies (NBFCs) and housing finance companies (HFCs), he added.

Both MMR and NCR collectively have loans worth $13 billion under the "severe" stress category with extremely poor prospects of recovery from the borrowing developers, the survey revealed. "Previously, many developers were engaged in high leveraging and fund diversions. To compound the problem, housing sales have remained tepid over the last few years, resulting in depleted cash reserves," said Agarwal.

The survey further showed that Bengaluru is currently better placed in terms of existing stressed loans, compared to both NCR and MMR.

"Merely 1 percent ($160 million) of the total $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," he said.

Bengaluru supersedes NCR and MMR markets in servicing its debt to banks, NBFCs or HFCs. (IANS)

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