Delhi-ncr realty hit by NBFC crisis
The non-banking finance companies (NBFC) liquidity crisis has impacted some real-estate markets more than others, delaying the possibility of an early recovery. For instance, non-banking financial companies, or NBFCS, have been a key source of funding for builders in Delhi-ncr, India’s largest property market, but given the slow sales, developers are finding it tough to maintain the pace of construction, plan launches or repay loans.
However, Bengaluru, which has clocked decent residential sales in a slow market and is known for its credible developers, has attracted significant capital despite the liquidity crisis.
Shakti Nath, chairman and managing director of Noidabased Logix Group, said raising money from NBFCS has been difficult, and it hasn’t helped that banks are also not bullish in lending to real estate firms.
“There were a couple of project launches we had planned this year, but they are on hold till the situation stabilises. Projects require financial closure and non-availability of debt makes it challenging.”
Earlier, Logix had raised capital from global alternative asset manager Apollo Global Management LLC.
Another Delhi-ncr developer, requesting anonymity, said he was forced to arrange some capital for interim funding in the December quarter for his ongoing projects, after a Mumbaibased NBFC, which had committed a loan earlier, withdrew.
He, however, did not specify the source of funding. In a postearnings analyst call last week, DLF group financial officer Ashok Tyagi said that given the circumstances during the last quarter, the company has built a cash buffer.“if any lender can’t step in when there is a need, then you have some cash quotient with you,” Tyagi said.
Serial defaults by Infrastructure Leasing and Financial Services (IL&FS), which came to light in mid-2018, has made it difficult for NBFCS to raise money, forcing them not only to avoid fresh lending, but also from disbursing loans which were already sanctioned. Under-construction projects were earlier funded by customer advances, but with buyers staying away, particularly in markets such as Delhi-ncr and Mumbai, completing projects has been tough.
Bengaluru, on the other hand, has perhaps benefited the most as lenders are looking to deploy money, albeit selectively, in good developers and projects selling well. Bengaluru’s Total Environment Building Systems has raised ₹500 crore of long term, structured debt recently from L&T Finance Holdings for the second phase of a project.
Kamal Sagar, principal architect and chief executive officer, Total Environment, said that there was a huge impact on home loan sanctions.
Sanjay Nayar, member and head, KKR India, said that it is looking to provide tailored, flexible financing solutions to highquality projects in strong micromarkets, and mid-market residential and commercial projects in the city. Amar Merani, managing director and chief executive of Xander Finance, said that it has been very active over the past four months.
Today, refinancing deals have reduced by a fair margin because of the slow sales and not much cover against the projects. Vinod Menon, CEO, Citrus Ventures, says Bengaluru is an unavoidable market for lenders today.