Kotak Mahindra Investments to double real estate loan book in three years

Kotak Mahindra Investments (KMIL) is aiming to double its real estate loan book in the next three years, after having grown about 28 per cent over the last three years.

The growth is expected not only from the residential loan portfolio but also from the commercial segment in which it plans to be more aggressive, Chief Executive Officer Amit Bagri told businessline.

KMIL provides developer loans to the real estate sector as well as structured financing to the corporate sector. The real estate loan portfolio is over 48 per cent of its combined loan book which was around ₹10,800 at the end of September, up from ₹9836 crore at the end of March. The total loan book has increased 84 per cent over the last three years.

Focus areas

Bagri said that while the residential segment would account for a significant portion of the portfolio, it was looking to stabilise at a split where 65 per cent would be residential and the remaining commercial, warehousing and retail. Currently, the residential segment has a higher portfolio contribution of 80 per cent. Within the commercial sector, the company plans to focus on the mid-tier developers of offices, warehouses, while it is evaluating the data centre segment and has lent to a couple of malls.  

The robust pre-sales of the top ranked developers have been garnering them good collections, leading to a lowered dependency on loans. Collection figures of the top listed developers have doubled in two years to over ₹60,000 crore in FY23, and it is set to cross ₹80,000 crore in the current fiscal year, with most of the developers expecting to overshoot their stated targets. This has resulted in credit lines from lenders not being fully utilised. With debt levels of many companies drastically reduced, they have more free cash flows to deploy into their business.

While this poses a challenge to the financier, Bagri said that there were good opportunities with the tier 2 developers, but with good track record, governance standards and good projects in good locations. Developers who had slowed down in previous years when demand was low are now coming back. “I think the opportunity is large,” he added.

The company is focused mostly on projects in the large eight cities across the country.

Bagri said that lending to commercial sector would be selective as many of the larger players would have loan tie-ups with banks especially with lease rent discounting arrangements. But “we will increase commercial, we want to increase commercial, we want to increase warehousing, we want to increase retail. And we have to pick and choose where we can compete,” he said.

The company’s loans are priced at around 12-14 per cent range on average while its average cost of funds are slightly over 8 per cent.