NBFCs to raise funds at low cost ; good news for realty sector

The fall in bond spread, facilitating NBFCs to raise funds at lowest cost, is a positive development on the liquidity front which is set to ease the fund crisis of the real estate  sector, in turn putting its revival back on rail.

The average corporate bond spread- the difference between the yields of corporate bonds and government bonds of the same tenure for five year paper of AAA- rated NBFCs has fallen to 102 basis points in May, the lowest since October 2018. Moderation in yields and spreads can be attributed to rate cuts conducted by the RBI and the possibility of further rate cuts by the central bank in the June monetary  policy.

This has set the stage for NBFCs to pick up money at the lowest costs since these were struck by liquidity crisis over 6 months back.

Says Pradeep Aggarwal, Chairman, Assocham National Council on Real Estate, Housing & Urban Development and Founder & Chairman of Signature Global, ” Low cost sourcing of funds by top rated NBFCs means that they can step up lending to developers and retail lenders at a lesser rate of interest. This assumes significance especially as NBFCs were fulfilling more than 50% of total fund needs of developers and following the crisis, they had  not just cut down lending to both developers and retail lenders but also made it costlier”.

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