LIC Housing Finance Ltd. has referred 14 real estate projects for last-mile funding through the alternative investment fund (AIF) created to revive stalled housing projects, said chief executive Siddhartha Mohanty on Friday.
Mohanty told reporters that LIC Housing Finance’s exposure to these projects is about ₹1,100 crore and it is the sole financier in all its real estate projects.
“We are very much in control (of our builder portfolio). We do not have any joint lending or any consortium lending," he said, adding that LIC HFL has advised those developers to be in touch with SBICAP Ventures, the investment manager.
Mohantay had told analysts on 31 January that there are 260 accounts in the developer loan portfolio and the housing finance company has identified non-performing assets (NPAs). It has also referred five such cases to the National Company Law Tribunal (NCLT). The top 10 developer loans account for roughly 15% of the developer loan book as of the December quarter of FY20. Moreover, of the total bad loans of ₹5,686 crore, slightly more than ₹2,000 crore is from project loans and the rest is from the retail segment.
In November last year, the Cabinet approved the creation of a 'special window' fund to provide priority debt financing for the completion of stalled housing projects that are in the affordable and mid-income housing sector.
According a market study by SBICAP Ventures, there are about 4.58 lakh stalled housing units and the aggregate funding required to complete the stalled projects is ₹55,000 crore.
Last week, the Reserve Bank of India allowed banks to extend the date of commencement of commercial operations (DCCO) of project loans for commercial real estate, delayed for reasons beyond promoters’ control, by another year. This extension, the RBI said, will not lead to downgrading of the asset classification. Through this, the RBI has allowed banks the leeway to not classify such loans as non-performing and save on provisions.
Commercial real estate exposure of banks is typically considered riskier than other loans. Hence, banks need to set aside more money as standard asset provisions between 0.75-1% for these loans. Typically, banks have to set aside 0.4% of a loan as provisions for most other loans.
However, this relaxation on DCCO is not applicable to non-bank lenders, the central bank clarified on 12 February.
Total commercial real estate loans by banks stood at ₹2.19 trillion as on 20 December, 15.6% higher than a year ago. India’s largest lender State Bank of India (SBI) has an exposure of ₹32,444 crore to commercial real estate, 1.64% of its total loan book of ₹19.78 trillion as on 31 December.