Last-mile Funding by NBFC to Stressed Real Estate Industry

Last-mile Funding by NBFC to Stressed Real Estate Industry

The Non-Banking Financial Company (NBFC) has taken the initiative to put the real estate sector back on the fast track, by announcing last-mile funding that will help in completion of stalled and incomplete projects in the sector. 

Major Assistance of NBFC in Last-Mile Funding

Combined slow sales, lack of customer advances and liquidity reduction have created stress for developers of real estate, investments for specific situations and financial difficulties.

In addition to the SBICAP Ventures and government-sponsored managed last-mile fund for stuck projects, a majority of large institutional investors are also involved in special opportunities funds too. Including SBICAP Venture's fund of Rs 25,000 crore, several large domestic and foreign funds with more than Rs 35,000 crore looking at such investment opportunities in the sector. 

In the current context, real estate developers will encounter more financial challenges. Therefore, patient capital will be needed and more last-mile funding transactions with partial liquidity solutions for existing lenders will be available on the market. Developers keep receiving and continue to evaluate investment proposals.

Banking Institutions Real Estate Funding 

One of the Indian biggest domestic real estate funds, the Kotak Realty Fund has created $1.8 billion already and has considerable amounts ready to be used in such assets. The Housing Development Finance Corp (HDFC), India's largest mortgage lender, is also looking to invest in real estate funding for these projects in order to improve their potential and financing.

Much of the Rs 35,000 crore funds come from U.S. and Asian funds. Over Rs 5,000 crore from special funds have already been collected by Anarocks Capital. This capital is raised for projects mainly in Hyderabad, Noida, Greater Noida and Gurgaon in NCR, Mumbai, Thane, Bangalore, and Pune. The projects concerned are between 100-800 units each with ticket sizes ranging from Rs 28 lakh to Rs 15 crore.

Indiabulls Housing Finance collected more than Rs 2,000 crore from global stressed assets investor Oaktree Capital through monetization of part of the real estate loans during such transactions. Also recently sold about Rs 4,000 crore of loans, ECL Finance, the Group's non-bank financing arm of the Edelweiss Group, was largely extended to real estate, to global asset buyers.

These funds represent a major relief to cash-starved residential real estate developers and other stakeholders in the industry, including aggrieved household purchasers. Having their great due diligence is therefore just as important as the rescue potential.

However, with last-mile funding by NBFC would help the stressed real estate builders and buyers will be greatly benefited by rapid completion of the residential projects.

By: Shailaja K