Indian shadow banks face cash crunch as developer defaults mount

Cash-short developers have to repay around $18.15b in outstanding debt.

Bloomberg reports that India's cash-starved shadow banking sector face further funding challenges as property developers need to repay $18b (INR1.29t) a year on outstanding debt but generate less than half of the income that can be used for repayments, according to a study by research firm Liases Foras. 

Non-bank lenders have rapidly grown their exposure to developer loans that are not protected by rental revenues, data from Jefferies Group LLC show. 

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Developers comprised 10.7% of advances made by non-banks and housing finance companies as of March 2018 whilst they only made up 4.4% of advances in banks, data from Jefferies show. Similarly, real estate and allied businesses account for the largest number of cases referred to India's bankruptcy process. 

More defaults will come from the north and west, with fewer likely from the south, said Kumaran Chandrasekaran, a credit fund manager at Sundaram Alternate Assets Ltd, adding that about 10% of outstanding loans probably won’t be repaid and 10-15% will face delays.

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