Structured debt transactions in real estate slow down

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MUMBAI | BENGALURU: Structured debt transactions in real estate have slowed down over the past few months in the backdrop of shortage of quality assets and tighter business environment owing to regulations such as RERA. Most of the assets with good revenue potential have already been lapped up by large private equity funds and institutional investors.

A total of 642 real estate-related debt deals were recorded in the first half of this year, with around 33% of them extended in March alone. However, the number stands reduced at 11% in May and June together, showed data from real estate information and analytic firm Propstack.

“Recent transactions and data points clearly indicate a significant dip in developer loans during the last quarter. Among other things, post RERA implementation by developers and a cautious approach by lenders have contributed to this scenario,“ said Raja Seetharaman, director, Propstack.

Most private equity firms have been shifting their focus towards higher equity participation as returns on pure debt or structured deals are easing. The challenge is expected to get bigger as developers also shy away from high-cost debt. Fall in security coverage is also keeping investors away from projects that are looking for financing now.

“It’s becoming extremely challenging to find securities against debt funding. High interest security covers are depleting in the absence of no new launches. Whatever financing has happened in the past 4-5 years could service interest, principal repayments have been negligible,“ said Ambar Maheshwari, CEO (private equity), Indiabulls Asset Management Company .


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