Rental Income From Commercial Realty To Come Down

In these pandemic times, companies are looking for ways to cut down their costs, and the first thing that comes to the mind when cutting costs, its the rent that you’re paying. Companies are looking to get their rental bills reduced by renegotiating the deal and bringing their expense down by 10-20%.

The construction finance segment has already been under pressure. Another segment that is likely to witness delinquencies is construction housing loans. This is because people have bought houses but are facing construction delays, which are expected to increase further post-Covid. It is highly likely that the construction projects that are already under stress might not see the light of the day which could also be the reason for the increased rate of delinquencies.

Recovery from loans in the construction housing loans sector will be negligible since it is not applicable under the SARFAESI Act (The Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest Act, 2002). Even for the likes of HDFC, the asset quality has deteriorated in the quarter for the construction housing loans and the construction finance segment.

During the first phase of the moratorium, the lenders were lenient while giving them to the people. 50-80% of the book of the wholesale segment is under moratorium while the retail segment is at 20-50%.  In the moratorium 2.0 period, which is the additional period of 3 months, the lenders will be more vigilant. The moratorium percentage will also come down for both, retailers and wholesalers and the asset quality will also come down in the coming quarters.

With respect to credential demand, a 25-30% decline in disbursement is being built in this FY primarily due to the lockdown. With the first quarter already washed out, it is expected that the demand will pick up slowly with the first two quarters being very muted in terms of disbursement growth and housing demand.