Bad loan crisis may be revived due to the real estate market slump
The real estate market is facing a major cash crunch, which could be a major conflict for its banks. Many builders may find it difficult to repay their loans because of the slump in the residential property market.
More than half of the loans provided to developers are accounted for by housing finance firms. According to Fitch Rating’s Indian division, about $10 billion of development loans are up for repayment in the first half of 2020. According to Indian financial authorities, banking sectors are in a decline after nearly four years because of bad loans that come up to more than $150 million. Over the last nine months, the number of property development that has fallen into development has almost doubled. Due to this, the pressure has been falling on Non-Banking Financial Companies (NBFCs). According to various banks and real estate sources, banks could be exposed in case there is an implosion of these NBFCs. Various projects have been struck all over India as buyers are looking for developers to finish them so that their hard-earned money will not be lost forever. The toll in human misery is also high because of the recent cash crunch.
15 October 2019
RBI trying to figure out how NBFC price loan products
After making the banks link their retail loans to an external benchmark, the Reserve Bank of India (RBI) is currently trying to find out how NBFC (Non-Banking Financial Institutions) price their products. According to reports, RBI wants more transparency in how housing finance companies price their products.
Other than that, RBI is reportedly not content with combined fixed and floating rate home loan product, on which SBI chairman had recently spoken about.
As per reports, after removing the regulation of housing finance companies, the central bank is trying to bring uniformity in the bank and HFC loan sector. According to reports, most HFCs are not following MCLR (Marginal Cost of Funds-based Lending Rate) and still linking their loan products to the prime lending rate. RBI is trying to figure out how they are deciding on the home loan interest rates.
23 September 2019
Around Rs.20,000 crore of liquidity aid to be offered to housing finance companies
The Finance Minister of India, Neermala Sitharaman has announced several measures to revive the Non-Banking Financial Companies (NBFCs) that are currently starving for capital. This may turn out to be a breather for the NBFCs who are looking to resume their efforts to expand their businesses ahead of the coming festive season. The National Housing Bank (NHB) will now be able to extend credit lines to the NBFCs for up to Rs.30,000 crore as against the Rs.10,000 crore earlier. The Partial Credit Guarantee Scheme for housing finance firms and NBFCs to purchase pooled assets of up to Rs.1 lakh will be tracked at the highest level in each bank. The Finance Minister has also given a cue of new measures to be taken for the financing of real estate/housing/construction sector in the coming week.
28 August 2019
NBFCs seek loans from foreign banks
Sources reveal that Non-banking Finance Companies, including Piramal Capital Housing, Bajaj Finance, Hero FinCorp, L&T Finance, Tata Financial Services, and IIFL Finance are planning to take loans worth of $200 million to $400 million each from foreign banks. The loans are to be raised in the form of External Commercial Borrowing (ECB).
As per reports, among the NBFCs, IIFL Finance may raise $500 million in loans. Reports suggest that though there are currency risks involved, the NBFCs are seeking loans from foreign banks to change their funding pattern.
Loan maturities are likely to be in the range of 3 to 5 years. The issuances are likely to take place after the elections are over, sources further revealed.
8 May 2019
NBFC liquidity crisis begins to impact real estate sector
Despite the Reserve Bank of India’s (RBIs) recent efforts to improve bank credit to non-banking finance companies (NBFCs) and housing finance companies (HFCs), real estate developers and home buyers are reportedly facing a fund crisis. According to sources, many sanctioned housing loans are not being disbursed. In the same line, many financial institutions have also refused to release funds committed earlier to under construction-linked home loan schemes. The fund crisis has resulted in home loan interest rates surged by 50-75 basis points (bp) over the last few months. The fund crisis was reportedly caused by the increasing number of repayment defaults by IL&FS, which led to mutual funds and other key financial players freezing their investments in the commercial paper (CP) market. This has led to smaller NBFCs liquidating their respective loan portfolios in order to increase funds.
21 November 2018
Reports claim NBFCs liquidity crisis to affect home loan sales
According to reports from Nomura, a Japanese Brokerage, non-banking financial companies’ (NBFCs) home loan disbursement are set to drop amid the ongoing liquidity crisis in the country. In the same line, non banking lenders are also expected to be under presssure on account of prospective asset liability mismatches in the rising interest rate regime. Nomura believes that the negative growth in metros can be attributed to the high rate of interest, afforadability issues, lower inflation and implementation of new policies to improve transparency. Reports also claim that house prices rose at an average 18% p.a. Between FY2010 and FY2015 which later dropped to 7.5% during FY2017.
25 October 2018
SBI to bail out liquidity-starved NBFCs by offering to buy assets worth Rs.45,000 crore
In a move to expand the loan portfolio of the bank at attractive rates, the State Bank of India has offered to bail out the liquidity-starved Non-Banking Finance Companies (NBFC) that are being impacted by various debt repayment defaults by crisis-ridden IL&FS. The bank has proposed to purchase up to Rs.45,000 crore worth of good quality assets in order to provide the liquidity the NBFCs require. Earlier, the plan was to invest Rs.15,000 crore on the NBFCs. However, with the bank looking on to expand the loan portfolio at good rates, SBI has decided to buy additional assets worth another Rs.30,000 crore.
11 October 2018
NBFCs And Pure-play Mortgage Lenders Have Exposure Of Whopping 2.2 Trillion
At a time when realtors are still recovering from the pains inflicted by note ban, GST and RERA, Non-banking Finance Companies and mortgage lenders are using all tricks to sell the inventory in a bid to ensure that their money is secured. It is be mentioned here that NBFCs and mortgage lenders control the lion’s share of developer loans. As per a report, NBFCs and mortgage lenders have an exposure of 2.2 trillion in comparison to the exposure of commercial banks which is 1.8 trillion. With very little demand in the market, the lenders fear that chances of developers going broke are very high. The realty sector in recent times has seen a lot of reforms due to demonetization, introduction of Real Estate Regulatory Act (RERA) and GST. As per a report by JLL, as many as 4,40,000 residential units in the country remained unsold by the end of 2017. Out of that, 34,700 units of ready-to-move-in homes remained unsold in metros like Mumbai, Chennai, Hyderabad, Bengaluru, Pune, Delhi-NCR and Kolkata. Another report by Ambit Capital highlighted that some NBFCs and Housing Finance Companies are running huge asset liability mismatches for two years which is slated to further impact their margins given rising bond yields.
9 April 2018
NBFCs may record a 35 percent Growth in Earnings
It is expected that non-banking finance companies will report a 35 percent growth in earnings, whereas retail loans by small and medium businesses will continue to move at a brisk pace. As for the state-run banks, they continue to be cautious owing to bad loans.
Housing finance companies are also quite likely to maintain their momentum, backed by the boost in the affordable housing sector and the Pradhan Mantri Awas Yojana.
The vehicle financing sector is also expected to gain a boost, owing to good monsoon, lower credit cost and lower income reversal. The same holds good for consumer finance enterprises too, which are on track owing to surge in sales during the festive season.
16 January 2018