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MCA raises concerns over credit stress in real estate sector

real estate | Feb 22, 2019 3:08 PM IST

MCA raises concerns over credit stress in real estate sector

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The ministry of corporate affairs (MCA) has again highlighted that the sector should be under a constant watch to avoid any knee-jerk reaction for the economy and the stock markets, sources told CNBC-TV18.

Ongoing stress in the real estate sector has raised fresh concerns for the government. The ministry of corporate affairs (MCA) has yet again highlighted that the sector should be under a constant watch to avoid any knee-jerk reaction for the economy and the stock markets, according to sources.

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"MCA has recently written to the Prime Minister's Office, finance ministry and the Reserve Bank of India red-flagging the seriousness of the credit stress in the real estate sector," a senior government official told CNBC-TV18.
The letter highlighted the need and urgency to monitor the sector given the exposure non-banking finance companies (NBFCs) and housing finance companies (HFC) have to the sector.
"Poor sales, inventory pile up coupled with other circumstances have put the real estate sector under stress, One needs to constantly wait and watch so that defaults are not being made," government official added.
"Real Estate sector is going through a difficult phase, any default needs to be reported immediately," the official said.
According to government estimates, NBFCs and HFCs have ₹1 lakh crore of exposure to the real estate sector.
It was in October last year when post the IL&FS crisis, MCA had prepared a detailed report on the NBFC and HFC sector. The report had highlighted the credit stress for NBFCs and HFCs, noting that industry players like DHFL, Indiabulls Housing Finance and PNB Housing Finance are the three leaders which are sitting on high risk.
 
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