Real estate as collateral backing bad loans in India may be worth $45 billion

HDFC Realty has been approached to sell such property assets by three banks seeking to recover some of their bad loans, says CEO Vikram Goel


Lenders are stepping up bad-loan recoveries as a March deadline set by the central bank to clean up their balance sheets draws closer. Photo: Mint
Lenders are stepping up bad-loan recoveries as a March deadline set by the central bank to clean up their balance sheets draws closer. Photo: Mint

The value of Indian real estate posted as collateral for problem loans could be worth Rs3 trillion ($45 billion), according to a unit of India’s largest mortgage lender.

HDFC Realty has been approached to sell such property assets by three banks seeking to recover some of their soured loans, said Chief Executive Officer Vikram Goel. He declined to identify the lenders or give the value of the assets they’re seeking to unload.

Lenders are stepping up bad-loan recoveries as a March deadline set by the central bank to clean up their balance sheets draws closer. The stressed-asset ratio for the country’s banking system has risen to the highest level in at least 17 years, curtailing bank profitability and eroding capital buffers.

“Banks are approaching us for help with disposal of the real estate collateral due to our presence across the country and also as they believe that we have proper systems and processes in place,” Goel said in an interview last week at his office. “It is a good business opportunity for consultants like us.”

Goel declined to say what fees his firm would charge for disposing of the property assets. More than 50 percent of its revenue comes from advising on the sale of residential properties. The unit of Housing Development Finance Corporation (HDFC) Ltd. also offers consulting and valuation services, as well as the sale or leasing of land and commercial properties. The company has more than 400 employees in 19 cities across India.

HDFC Realty has been involved in selling distressed assets before. Earlier this year, the Securities and Exchange Board of India appointed the consultancy and SBI Capital Markets Ltd. to sell properties owned by financier Subrata Roy, who was imprisoned in early 2014 for allegedly defrauding investors. Roy is currently out on parole.

Goel said HDFC Realty’s current mandate is to sell 30 properties owned by Roy’s Sahara India Pariwar, which are valued at about Rs 24 billion. Bloomberg

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