Stalled res projects worth $66 bn faces bankruptcy proceedings

Owing to the financial crisis and the slowdown in the real estate sector, residential projects worth around USD 66 billion are facing bankruptcy proceedings, a recent survey said. According to property consultant JLL, nearly 4.54 lakh units running behind their completion dates due to various reasons.

"In the current scenario, it is the residential real estate segment that presents the maximum amount of stressed assets. India's residential sector has been reeling under the pressure of delayed/stalled projects with 4.54 lakh units running behind their completion dates," the agency said. Some of them are already under bankruptcy proceedings and the value of these projects is estimated to be USD 66 billion, JLL said.

As per the Insolvency and Bankruptcy Board of India, a total of 115 insolvency cases have been filed as of September 2019 under real estate category. Of these 87 cases are under process while 28 are closed. "The NBFC debacle and subsequent liquidity crisis added to the problems of most of these projects. The closing of the refinance window led to many stalled projects for want of finance. This coupled with buyer's preferring to look at ready-to-move-in properties affected the housing projects," JLL CEO and Country Head India Ramesh Nair said.

It may be noted that the government recently announced a special funding window of Rs 25,000 crore to ensure speedy completion and delivery of affordable homes locked in stalled housing projects. "This fund with commitment from the government and other lending institutions are expected to be USD 3.5 billion.

This special fund is expected to infuse the much needed liquidity, but will fall short of meeting the entire requirement," Nair added. According to the consultant, institutional investors have made a solid start by investing USD 1 billion in stressed real estate opportunities.

"This strategy is expected to gain pace as the IBC gets more established in the country. Corporates saddled with huge debt have been liquidating real estate assets, leading to new opportunities. Investors are evaluating various options including acquiring non-performing assets and distressed sale," he said. The recent stressed asset deal has been the sale of an IT park in Bengaluru by Cafe Coffee Day Enterprise for USD 385 million to reduce its debt.

Apart from this, Blackstone and Salarpuria Sattva Developers have acquired the 90-acre, IT-focussed Global Village Tech Park. Similarly in the hotel sector, Brookfield has received approvals to acquire assets of Hotel Leela Venture comprising key hotel properties in Delhi, Bangalore, Udaipur and Chennai for USD 564 million.

"The capital commitment by institutional investors gives comfort to the lenders leading to a faster resolution in these deals. Such deals also provide an opportunity for investors to optimise their returns in line with underlying risks," he said. Nair further noted that recovery in housing sales, implementation of RERA and liquidity infusion from the government are likely to improve the sentiments.

"Hopefully, soon the challenges of the sector will be over. As a result, the growth will be reflected in coming quarters," he added..

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)