By: Ravi Sinha
Track2Realty Exclusive
The Indian realty estate companies reeling under plunging sales and liquidity issues have something more challenging to negotiate-the piling debt in their balance sheet and the banks’ deadline to repay coming close. As a result, said sources with Reserve bank of India to Track2Realty, at least 22 realty companies (including 7 listed ones), have already approached the banks to consider restructuring loans in 2012.
It is believed these loans amount to around $3-4 billion (about Rs.15,000 crore). With the sales hitting low and all other sources of funding drying up, many of these companies are not in a position to repay the debt unless they sell their core assets.
According to the Reserve Bank of India, the total lending to (commercial) real estate sector by mid-November stood at Rs.117,000 crore. Research firms have indicated the gross NPAs of banks could be anywhere around 3% of the total lending.
RBI sources maintain that banks are in a fix since they don’t wish to restructure the loans further in view of the sector’s failure to come to terms when restructured last time. However, as sources admit, “it is also not in the bank’s interest to let these loans become NPAs.”
The 15 largest listed real estate companies show a total debt of around Rs.35,000 crore on their balance sheet.
Industry experts point out that real estate players have been paying anywhere around 15-16% interests to banks and about 18% to non banking finance companies (NBFCs).
Last week, credit rating agency CRISIL downgraded India’s largest real estate player DLF’s non converting debentures and other debt programmes. But DLF said it will be able to generate cash flows by selling its upcoming projects. However, other players too would find it hard to raise liquidity in the given situation.
