Credit lines lie unutilised as developers bank on sales

financialexpress.com:

Backed by strong residential sales and collections from customers, property developers are not utilising credit lines sanctioned by their lenders including banks, housing finance companies and non banking finance companies (NBFCs) for construction finance .

Construction finance is a Rs 1.25 lakh crore a year market in the country. Developers get construction finance at 8 to 11 % depending on their credit profile.

According to industry experts, top developers are not utilising  70 to 80 % of credit lines sanctioned by banks and other finance companies as they are posting record residential sales.

Housing sales across the top cities have hit record high in the third quarter of the calendar year, despite the usually slow monsoon quarter, and expected to touch decadal high this year, ringing the cash registers of property developers.

“The need for construction finance is down. Our construction finance lines are largely being unutilised. Developers are not using credit lines as sales and collections are very good,, ” said Amit Bagri, chief executive at Kotak Mahindra Investments, a non banking company of Kotak Mahindra Group.

He said their construction finance lines are not seeing utilisation of more than 25 to 30% of the sanction limits. “Repayments continue to come in thick and fast due to strong collections; hence the need for more new sanctions to grow the book,” he said.

Bagri said they are seeing this trend across cities such as Pune, Bangalore Hyderabad, Mumbai, NCR and so on.

A senior executive at a NBFC said :” Good developers have strong cash flows as sales are good. That is the reason they are not drawing down the sanctioned credit lines.”

Vishal Shrivastava, executive director at Anarock Capital said that earlier