NBFC crisis slows GDP growth, real estate worst hit

With the liquidity squeeze in NBFCs and HFCs, the refinancing cycle for CRE players has stalled." Jaikishan Parmar of Angel Broking told IANS: "It would be appropriate to say that the financial sector squeeze has been responsible directly, and to an extent indirectly, for the slowdown." Parmar added that ever since the RBI came down heavily on banks for encouraging the 10:90 pattern schemes, NBFCs were funding such projects. Also, the last mile lending by NBFCs on behalf of banks was driving the demand for farm equipment, tractors, two-wheelers among others, he said. NBFCs were also quite active in financing four-wheelers, which got impacted by the crisis. In fact, HFCs have already seen their loan book disbursements contract by nearly 20 per cent in the last quarter. On the severity of the liquidity crisis which hit the realty sector, Anuj Puri of ANAROCK Property Consultants said "nearly $34 billion of mutual fund debt in NBFCs and HFCs was maturing between October 2018 - March 2019". This shows that the October-March period has been a very tough six months for the sector. Puri explained that prior to the crisis, the sector was already dealing with a cash crunch and subdued demand, due to which more than 75 per cent of the available credit facility was already exhausted. He said: "As per the S&P BSE Realty index, the debt-equity ratio of the top 10 listed players in the financial year 2013-2014 ranged anywhere between 0.10 to 0.85 which increased to anywhere between 0.17 to more than 1 in the current fiscal." This may not seem alarming, but the situation is worse in the case of small and mid-size developers whose debt-equity ratio is much higher, Puri added. Besides, of the approximately 10,000 developers in the country today, only 35-36 are listed. Hence, the financial numbers could be even worse, Puri said. For the NBFC sector to pick up, most experts said the issues of maturity mismatch and cost of funds need to be urgently addressed. Investors should be cautious on those NBFCs, according to Kurian, which have high leverage or those which have seen credit rating downgrades or are facing significant funding constraints. "We would be cautious on NBFCs with chunky corporate exposures or large exposure to commercial real estate and capital markets," he added. Dailyhunthttp://www.penninetroutfarmandfishery.co.uk/UserProfile/tabid/61/userId/1865675/Default.aspx

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