Company India can shed lengthy -term debt of $341 billion by monetising actual property, in keeping with JLL, an actual property and funding administration agency.
An unsure financial situation has pressured company finance heads to re-imagine actual property belongings as sources of funds to cut back debt.
The mixture financials of roughly 2.45 lakh non-government, non-financial corporations point out that debt accounts for lower than 50 per cent of their web price.
RBI information on financial monetary place in 2018-19 reveals that the worth of land stood at $52 billion and that of buildings at $89 billion. This whole of $141 billion is 41 per cent of the excellent long-term debt of $341 billion.
One of many possible causes for this case is decrease income generated from the belongings they’d invested in.
Samantak Das, chief economist and head of analysis & REIS India, JLL, stated: “With the autumn in financial exercise, Covid-19 has impacted asset utilisation and profitability tremendously.
“Within the present circumstances, sale and lease-back of belongings is probably going to offer long run regular rental yield… monetisation of those belongings might cut back substantial debt. Funds generated from the sale of those belongings may very well be excessive sufficient to cowl the complete debt.”
Nonetheless, one of many largest challenges is the mindset of company homes, who really feel that proudly owning actual property is of utmost significance. In lots of instances, since land is allotted underneath varied state industrial insurance policies, the choice of sale and leaseback just isn’t even thought-about.
Nonetheless, in at this time’s unsure financial atmosphere, company finance heads are doubtless to have a look at choices of utilizing actual property as a supply of liquidity.
Buyers might face challenges on account of possession titles and valuation. Such offers might take longer to shut due to documentation and taxation points.