1014 octoct 2019 - credai...retired squadron leader krishan mitroo has paid 90% of the cost of his...

10-Oct-2019 14-Oct-2019

CREDAI Bengal Daily News Update | 14.10.19

Severe cash crunch in real estate leaves beleaguered banks exposed

With about $10 billion of development loans coming up for repayment in the first half of

2020, the fallout could spread to mainstream banks that have lent money to the shadow

lenders or invested in their bonds.

HIGHLIGHTS

NBFC crisis deepens as builders fail to repay loans to shadow lenders

The fallout of the development could affect the regular banking sector

The number of property developers falling into bankruptcy has doubled during the past nine

months

India might have thought the worst of a bad loans crisis was past, but a severe cash crunch in

the real estate industry could augur fresh strife for its banks.

A slump in the residential property market is leaving many builders struggling to repay loans to

shadow lenders - housing finance firms outside the regular banking sector that account for over

half of the loans to developers.

With about $10 billion of development loans coming up for repayment in the first half of 2020,

according to Fitch Rating's Indian division, the fallout could spread to mainstream banks that

have lent money to the shadow lenders or invested in their bonds.

Indian financial authorities, including the central bank and government, have said this year that

the banking sector's bad loans - totalling more than $150 billion - are on the decline for the first

time in four years after ballooning during a debt crisis.

But the number of property developers falling into bankruptcy has doubled during the past nine

months, piling pressure on non-banking finance companies (NBFCs), commonly known as

shadow lenders.

Newspaper/Online India Today (online)

Date October 14, 2019

Link https://www.indiatoday.in/business/story/severe-cash-crunch-in-real-estate-leaves-beleaguered-banks-exposed-1609029-2019-10-14

Potential implosions of these NBFCs could expose banks, according to 12 banking and real

estate sources.

A senior banking industry official, declining to be named due to the sensitivity of the matter,

said banks would be affected by the property cash crunch in three ways: their lending to

NBFCs, their own direct exposure to developers and also individuals who do not repay

mortgages.

"It will be a triple-whammy," he said.

While the Indian banking system could be hit by billions of dollars of additional soured debt,

the cash crunch in the housing market has levied a toll in human misery.

Retired Squadron Leader Krishan Mitroo has paid 90% of the cost of his house in Noida,

northern India, to developer Jaypee, and the property was supposed to be handed over five years

ago. However, Jaypee was forced to delay the project and went into insolvency in 2017.

"The project has been stuck and there is no progress at all. Even the bankruptcy court has not

been able to resolve the issue so far, it is just hanging in thin air," Mitroo said. He did not say

how much money he had paid, but properties in that project range from about $56,000 to

$140,000.

Several such projects are stuck across the country and buyers are waiting for new developers to

take interest and complete them with the hope that their hard-earned money, which has been

stuck for years, won't be lost forever.

BAD LOANS PILE 'HUGE'

The property sector has been battling a downturn for the last 3-4 years. Things have now,

however, hit a critical point due to a liquidity crunch hitting shadow banks that are big lenders

to both developers and property buyers.

As of June 30, 421 realtors were under the corporate insolvency resolution process (CIRP), up

from 209 on Sept. 30 last year, data from the Insolvency and Bankruptcy Board of India shows.

Defaults by two housing finance companies, Dewan Housing Finance Corp and Altico Capital,

have increased fears of contagion to the banking system.

Dewan and Altico did not respond to requests for comment.

Shadow lenders will be highly exposed when loans worth roughly 700 billion rupees come up

for repayment in the first half of 2020, as many builders may struggle to repay, Fitch's India

Ratings said last month.

"The number of stressed assets in real estate are huge," said Rohit Poddar, managing director at

Poddar Developers. "The stress now is just the start, only the mid-sized to large developers will

survive, others will die."

If three-quarters of the high-risk category of outstanding real estate loans is not repaid, that

could lead to additional bad debt of $15 billion on banks' books in the next few years, according

to confidential research conducted by one of India's leading real estate consultancies for an

international financial client, and provided to Reuters.

The Nifty Bank index, which surged in late September after the government moved to slash

corporate tax rates, gave up more than half those gains as of Friday. Concerns about real estate

loans were one factor, according to analysts, but the fall was also driven by low growth in the

economy and the overall worsening asset quality of certain lenders.

Banks' gross non-performing assets fell to 9.3% of total loans as of March, from 11.5% a year

earlier, according to the Reserve Bank of India (RBI).

The improvement was bigger than the RBI had expected, having forecast a drop to 10.3% by

March and saying last December the ratio had fallen for the first time since 2015. The central

bank said in June it expected bad loans to continue to fall in the current financial year, both the

ratio and absolute sum.

But India still has the highest bad-loan ratio among major economies; by comparison Italy,

which has endured a major banking crisis, had a ratio of 9% at the end of last year.

Yes Bank and IndusInd Bank have the largest direct exposure to the commercial real estate

sector and would be susceptible to "asset-quality difficulties" if the real estate sector continues

to slow, according to a Moody's report in mid-September, which also said other banks such as

ICICI Bank and Axis Bank are likely to feel the pinch.

The four banks did not respond to requests for comment on potential difficulties arising from

the real-estate exposure covered in the Moody's report.

The chief financial officer of a large public-sector bank said the problems emerging in real

estate loan repayments were a major cause of worry.

It is unclear what individual banks will do to address the problem. State-owned banks, which

dominate the sector, have already received tens of billions of dollars from the government in

recent years to shore up their finances.

International banks have a very small presence in the Indian market.

JOB LOSSES LOOM

Indian banks' bad debt pile ballooned as a result of out-of-control lending in 2006-11 when the

economy grew rapidly, and beyond that. They under-reported their bad loans for years until

they were forced by the central bank to recognise and address the issue in 2015.

RBI Governor Shaktikanta Das touched on the real estate issue this month, saying the central

bank would be looking at the sector as part of its six-monthly report on the stability of the

financial system. The next report is due to be released in December.

The RBI declined to make any further comment on banks' exposure to bad real estate loans.

A rebound in the real estate market could alter the situation, but the outlook is looking

increasingly bleak.

Several industry sources said builders were struggling to offload properties, even though they

are ready to offer buyers up to 25% discounts on listed rates.

The situation now is so severe that real estate inventories across India are at an all-time high of

nearly four years and property prices have not risen in most parts of the country in the last 4-5

years.

Projects worth 1.8 trillion rupees ($25 billion) are stalled across India, according to property

consultancy firm Anarock.

As developers go to the wall, more than half a million direct jobs may be lost in the coming

months, the National Real Estate Development Council said. The number of indirect job losses

from related industries like cement and steel may be even higher.

Slowing sales are piling on the pain, with buyers staying away because they increasingly can't

afford properties.

The house price-to-income ratio, which measures the cost of housing versus the change in

income levels, rose from 56.1 in March 2015 to 61.5 in March 2019, indicating home purchases

have become less affordable.

While consumers are staying away, investors are also wary of residential purchases due to low

rental yields and meagre-to-negative capital appreciation.

"Sluggishness in sales is further raising concerns of the borrowers defaulting on the interest and

EMI payments," said Parth Mehta, Managing Director, Paradigm Realty.

As the sector gets stressed further, repayments to lenders are likely to get further hit and banks

will be increasingly unwilling to lend to property financiers and developers.

Pankaj Kapoor, chief executive of real estate consultancy firm Liases Foras, described the cash

crunch in the sector as a "bloodbath" that would deteriorate further.

"This situation is likely to continue for another two years, which means builders may have to

offer more discounts."

____________________________________________________________________________________

____________________________________________________________________________________

Newspaper/Online Economic Times


Projects with CC or OC need not register with MahaRERA

The clarification brings a much-needed respite to developers who were facing issues in

property registration in the last few days.

The Maharashtra Real Estate Regulatory Authority (MahaRERA) late on Friday night clarified

that projects spread over less than 500 sq m or with less than eight apartments need not register

with it and can go in for registration of properties without the RERA certificate if they have

received the completion or occupancy certificates from the competent authority before the

agreement for sale need.

The clarification brings a much-needed respite to developers who were facing issues in property

registration in the last few days.

On September 20, a day before the announcement of the elections in the state, a government

resolution (GR) issued by the property registration department insisted on RERA registration of

all properties. Instructions were also issued to the registration offices not to register any projects

without RERA registration.

“We have received several complaints from buyers and promoters for facing difficulties in

registration of agreement for sale/sale deed for real estate projects. Therefore, it was necessary

to issue the clarification on projects that can be excluded from mandatory RERA registration,’’

MahaRERA secretary Vasant Prabhu said in the order issued late on Friday night.

State president of Credai Rajiv Parikh told TOI that MahaRERA’s clear guidelines regarding

projects excluded from RERA registration have to be adhered to by the registration department

to avoid any inconvenience to buyers or developers.

President of Credai Pune-Metro Suhas Merchant said they had written to IGR Anil Kawde and

MahaRERA for amending its guidelines. ”We want to help mitigate the difficulties of genuine

developers and homebuyers at large to avoid inconvenience during the festival season. We have

requested the IGR to instruct all sub-registrars in the state to commence the registration

processes, which are on hold,’’ he said.

State IGR officials said the September 20 GR was issued to keep a strict vigil on the projects

and ensure that no building with the requisite sanctions was being sold to consumers.

________________________________________________________________

Newspaper/Online ET Realty(online)


Link https://realty.economictimes.indiatimes.com/news/industry/projects-with-cc-or-oc-need-not-register-with-maharera/71562184

Prestige Estates Projects considering REIT for its income

generating assets

Prestige Estates’ rental yielding assets is currently valued around Rs 10, 000 crore at 8%

cap rate.

Bengaluru-headquartered Prestige Estates Projects is considering REIT for its income

generating assets as its looks to monetise assets.

Prestige Estates’ rental yielding assets is currently valued around Rs 10, 000 crore at 8% cap

rate. The company’s rental income from retail and commercial properties is expected to reach

Rs 2,600 crore in the next three-four years from Rs 927-crore exit rental income at present.

“One way to reduce dependency on debt is to look at REIT and we are working towards it,” said

Irfan Razack Chairman Prestige Group. The company is also working towards India’s first retail

REIT global investors bullish on developing countries such as India in the backdrop of success

of India’s first REIT. “ It can either be office or retail portfolio that will go first for REIT,” said

Razack.

Prestige Group has more than 36 million sq ft of under-construction and upcoming office

properties. It also has six malls in the pipeline in addition to 10 operational retail assets.

“We are in talks with global funds to float over $300-million commercial platform with a

development potential of 10-15 million sq ft,” said Razack. The fund raising will be a precursor

to the REIT listing.

The firm is also looking to expand presence in NCR, Pune and Pune and has recently acquired

50% stake to develop total 2 million sq ft project with total 932 hotel rooms, 6.45 lakh sq ft

office space apart from a 2 lakh sq ft convention centre.

_______________________________________________________________



Link https://realty.economictimes.indiatimes.com/news/industry/prestige-estates-projects-considering-reit-for-its-income-generating-assets/71572868

Uttar Pradesh reels under inventory of Rs 1,43,000 crore unsold

housing units

Since three years, the real estate sector is facing an unprecedented slowdown after

witnessing a boom for years.

The realty sector is reeling under a burgeoning inventory of unsold housing units in Uttar

Pradesh valued at over Rs 1,43,000 crore, but the state government is clueless on how to tide

over the crisis.

Since three years, the real estate sector is facing an unprecedented slowdown after witnessing a

boom for years.

Unsold housing units continue to stack up in both government and private sector housing and

have become a cause of concern.

Unperturbed and unmindful of the swelling inventory of unsold dwelling units,

government housing agencies keep announcing new schemes, without thinking of ways to

dispose of pending houses.

As many as 9,500 housing units of Uttar Pradesh Housing and Development Board, with an

estimated worth of over Rs 9,000 crore, are lying unsold.

Besides, various development authorities across the state have over 20,000 unsold houses with

an estimated cost of Rs 10,000 crore. he Confederation of Real Estate Developers’ Associations

of India (CREDAI), an umbrella body of private sector realtors, told TOI there are 21,000 and

1,82,000 unsold houses costing over Rs 10,600 crore and 1,14,000 crore in Lucknow and NCR

region (including some parts out of UP also), respectively.



Link https://realty.economictimes.indiatimes.com/news/industry/uttar-pradesh-reels-under-inventory-of-rs-143000-crore-unsold-housing-units/71572883

‘Govt agencies can’t cut cost of housing units to boost sales’

When contacted, principal secretary, housing, Deepak Kumar, said unsold dwelling units of the

board and development authorities was a cause of concern.

He said unlike private sector, the government agencies cannot reduce the cost of units to sell

them.

The government has its limitations and constraints, but policies would be worked out soon to

sell unsold properties and ensure revenue and returns from the investment in them.

Kumar said the development authorities in state have a stock of about 20,000 unsold properties.

A former commissioner of Uttar Pradesh Housing and Development Board told TOI on

condition of anonymity that the sale and investment in real estate sector may have suffered after

demonetisation and is yet to recover from it.

________________________________________________________________

Nashik civic body starts audit of over 900 properties

The initiative comes after Bombay high court’s directive to present all details regarding

NMC properties. A civic official said that they have started gathering details of over 900

properties.

The Nashik Municipal Corporation (NMC) has started conducting audit of all its properties in

the city to gather information right from their construction date to their current status.

The initiative comes after Bombay high court’s directive to present all details regarding NMC

properties. A civic official said that they have started gathering details of over 900 properties.

The details are to be submitted by the NMC during the next hearing on December 2.

Educationist RL Luth had filed a PIL in the high court about the misuse of properties by the

public representatives. During the recent hearing, NMC lawyers submitted the details about

action taken against the property holders.

But the court was not satisfied with the information and directed the civic body to submit entire

history of the properties right from the construction to current status and the procedure followed

while leasing them at nominal rates.

“This (the audit) will include all information about the civic properties, when they were

constructed and leased to social outfits and on what basis. We have already started collecting all

the details required,” the NMC official said.

The NMC had recently conducted a similar survey NMC the month properties of May, covering

945 properties including community halls, library, gymnasiums and study halls. After the

survey, the civic body had sealed 382 properties that were found being misused or used for

commercial purposes.

Sealing of 117 properties was revoked after renewing the agreement and recovering charges as

per Ready Reckoner (RR) rates from the social outfits. Moreover, some properties that were

used directly by the citizens were also unsealed.

Currently, 265 properties are still sealed as they were being used commercially without

permission from the municipal corporation.

________________________________________________________________



Link https://realty.economictimes.indiatimes.com/news/regulatory/nashik-civic-body-starts-audit-of-over-900-properties/71549412

Delhi PWD orders regular inspection of government

accommodations to check misuse

In a recent written communication to the officials, the Delhi PWD asked them to conduct

the inspection every month.

The Delhi Public Works Department has directed its officials to regularly inspect government

residential accommodations to check their misuse such as overstaying and subletting.

In a recent written communication to the officials, the Delhi PWD asked them to conduct the

inspection every month.

"Instructions have been issued to carry out regular inspection to stamp out the misuse of

government residential accommodations like overstaying, subletting, unauthorised occupation

and unauthorised construction," the official communication stated.

The officials concerned have been asked to submit an inspection report every month, it said.

Bungalows and flats owned by the Delhi government are maintained by the PWD.

_______________________________________________________________



Link https://realty.economictimes.indiatimes.com/news/industry/delhi-pwd-orders-regular-inspection-of-government-accommodations-to-check-misuse/71554513

Only 38% work over under Life Mission in Palakkad

According to the mission’s report, of the 12,004 houses for which agreements were

executed, only 4,554 houses were completed in the district.

Though the deadline set to complete construction of all houses, for which agreements were

executed, under the Life Mission housing scheme ends in December, only work of 38% houses

were completed till September 2019.

According to the mission’s report, of the 12,004 houses for which agreements were executed,

only 4,554 houses were completed in the district.

District coordinator of Life Mission Aneesh J said that 3,914 houses are at roof stage, 2,337 at

lintel stage and for 827 houses only basements were constructed.

Of the 12,004 houses for which agreements were executed, 11,027 are in the general category

and 884 for scheduled caste and 93 for scheduled tribe category. Under the incompleted houses

taken up under the mission for completion, there are 8,120 houses of which 7,463 were

completed (91.91%) and only 657 remains to be completed in the district, the coordinator said.

He said that the mission survey in the district found 32,330 people with no land and house.

The maximum number of landless and houseless are in Malampuzha block (3,098) followed by

Chittur (3,018), Kollengode (2,862), Mannarkkad (2,585) and Palakkad block (2,519).

The 10 local bodies in the district have the maximum number of 11,122 landless and houseless

persons. The maximum numbers are at Palakkad municipality (4,053), followed by Pirayiri

grama panchayat (1447), Pudussery grama panchayat (867), Puthupariyaram grama panchayat

(746), Nalleppilly grama panchayat (722), Mannarkkad Municipality (721), Nelliampathy

grama panchayat (682), Koduvayur grama panchayat (661) and Perumatty grama panchayat

(629).

The least number of houseless and landless are in Ottapalam municipality (594), the Life

Mission survey found.

________________________________________________________________



Link https://realty.economictimes.indiatimes.com/news/residential/only-38-work-over-under-life-mission-in-palakkad/71562578

Bengaluru: Individual water meters to be a must for apartments

BWSSB chairman Tushar Girinath disclosed this at the 26th edition of Indian Plumbing

Association’s annual conference on Friday.

Individual water meters or submeters will soon be mandatory for apartment complexes with

three or more units. If they’re not in place, Bangalore Water Supply and Sewerage Board

(BWSSB) won’t sanction water connections to the builder. Submetering will enable flat

residents to monitor their water usage, reduce consumption and trim their water bills.

BWSSB chairman Tushar Girinath disclosed this at the 26th edition of Indian Plumbing

Association’s annual conference on Friday. At present, most apartment complexes in the city

don’t have individual water meters.

Water charges are included in the monthly rent, leaving occupants/tenants with no idea about

consumption. Even in flats where the board supplies Cauvery water, only a bulk water meter is

installed for the complex as a whole.

A senior BWSSB official said submetering will be made compulsory for new apartment

complexes. “We are also exploring ways to make it a must for existing apartments.

In fact, some complexes have taken the initiative to install meters. The meter cost and

installation charges will have to be borne by the builder of or apartment association. BWSSB

officials will conduct site inspections to check for meters before giving water connections to

apartments,” he added.

“Having submeters will also help us know if water is being lost to leakage, by comparing

supply and consumption. We are working with builders towards making submeters compulsory.

Even the dual piping system will be made mandatory. We are mulling a penalty for violators,”

said Girinath.

Rainwater harvesting

The BWSSB chairman also reiterated their plan to make rainwater harvesting mandatory for

all residential units spread over an area greater than 1,200 sqft. “While houses on plots more

than 1,200 sqft can collect the rainwater and discharge it back to the groundwater table, those

spread over 2,400 sqft and above will have to reuse it for their own purposes through the dual

piping system,” he explained.

Girinath said 36% of the total water supply in Bengaluru is Unaccounted For Water (UFW), of

which 25% is a result of leakage from distribution mains and pipes. Installing water meters

could save up to Rs 1,000 crore, he added. CN Ashwath Narayan, deputy chief minister, said



Link https://realty.economictimes.indiatimes.com/news/residential/bengaluru-individual-water-meters-to-be-a-must-for-apartments/71562473

water-efficient devices will be installed in government educational institutions in the state.

BO Prasanna Kumar, chairman, Indian Plumbing Association, Bangalore Chapter, said “We are

in talks with the government regarding setting up of another theme park in Bengaluru on the

lines of Jayanagar’s Rain Water Harvesting theme park. Here, we will have water-efficient

devices, fixtures and plumbing technology on display.”

________________________________________________________________

Railways may get Rs 7,500 crore under transit oriented

development scheme

The railways had expected to make Rs 5,000 crore from the land parcels before the TOD

policy was approved in Delhi.

The Indian Railways expects to earn Rs 7,500 crore from three land parcels near metro stations

in Delhi by monetising them under the Transit Oriented Development (TOD) scheme, two

officials aware of the matter said.

The railways had expected to make Rs 5,000 crore from the land parcels before the TOD policy

was approved in Delhi.

The Rail Land Development Authority (RLDA), which is a statutory authority under the

ministry of railways for development of vacant railway land for commercial use, has written to

the Delhi Development Authority (DDA) asking them to include land parcels at Kishanganj,

Shakur Basti and Punjabi Bagh under the TOD policy.

“The 15.27 hectare land at Kishanganj was put on sale for Rs 1,860 crore but in between the

DDA approved the TOD policy. Because the land is close to the metro station, under the new

policy, it can fetch up to Rs 2,700 crore. As per our estimate, the rate will go up by 53% if the

land becomes part of TOD,” said Ved Parkash Dudeja, vice chairman of RLDA.

The reason for increase in price is high Floor Area Ration (FAR) and commercial exploitation

of land under the TOD policy.

DDA usually allows 10% area of the land for commercial development while under the TOD it

can go up to 30%, which lead to increase in land price.

“Dynamics changes once you allow more area for commercial use since demand for

commercial space is more than residential. By joining hand with railways, the developer will

get a land without any litigation and no one else have huge chunk of land in Delhi,” Dudega

added.

RLDA is offering about 100 acres of land at the three locations close to the metro stations,

besides offering land parcels at other parts of the capital.

DDA had approved the TOD policy in September and it will soon be notified. In the policy,

development has been proposed along metro stations and for the pilot phase, Dwarka Sector 18,

Dwarka Sector 21, Mayur Vihar Extension, Mukundpur, Sarojini Nagar and INA (combined)

metro stations have been selected. “We are getting lot of request from the land owners but they



Link https://realty.economictimes.indiatimes.com/news/infrastructure/railways-may-get-rs-7500-crore-under-transit-oriented-development-scheme/71572915

want us to show that TOD can be a success. It will change the landscape of Delhi,” said a DDA

official.

________________________________________________________________

ANCON Group, HMDA set up Logistic Park at Hyderabad

The HMDA ANCON Logistics Park was inaugurated by K T Rama Rao, Telangana

Minister for IT and Industries.

ANCON Group on Friday announced the launch of the city's first Logistics park at Bengaluru

here under Public Private Partnership mode with the Hyderabad Metropolitan Development

Authority.

The HMDA ANCON Logistics Park was inaugurated by K T Rama Rao, Telangana Minister

for IT and Industries.

The Park comes with modern warehousing facilities and amenities to streamline the logistics

operations and propel the growth of the sector, a press release from the city based infrastructure

company said.

The first phase of Grade-A warehouse spans 1.2 lakh square feet with 1.2-meter-high plinth and

multiple docking yards on all sides for efficient loading and unloading and cross-docking

operations.

Rao said the state government has a strong focus on developing Hyderabad as the logistics hub

of the country with multiple parks becoming operational in the coming years.

HMDA is planning the logistic parks by designing and constructing these along the Outer Ring

Road of Hyderabad to enable a De-congestion of freight traffic, he said.

"The logistic parks would also support the industry in the region by providing world-class

storage and handling facility to store and distribute their goods.

We are excited to see the fast movement in this space with our first PPP model Logistics park,

HMDA ANCON Logistics Park, becoming operational within 24 months," Rao said.

The park would create employment for around 800 people directly and 1,500 indirectly, he

added.

________________________________________________________________



Link https://realty.economictimes.indiatimes.com/news/allied-industries/ancon-group-hmda-set-up-logistic-park-at-hyderabad/71549637

1014 octoct 2019 - credai...retired squadron leader krishan mitroo has paid 90% of the cost of his...

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