‘Challenges ahead for India's CMBS sector’

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New Delhi, May 8: Global rating agency Moody's on Thursday said India has made progress in the field of loans backed by non-residential property, but some challenges still exist.

"Based on our analysis of key success factors for Commercial Mortgage-Backed Securities (CMBS) offerings in India, regulatory environment is still challenging," Kalpesh Gada, head of structured finance products at ICRA, an associate of global rating agency Moody's.

Due diligence can be lengthy and mortgage enforcement is still an issue for non-banking lenders, Moody's said in a release.

Some of the constraints to growth of CMBS sector include stamp duties, lack of broader investor base and more transparency.

"Stamp duties are another major obstacle, and in terms of environment, a broader investor base and more transparency are also needed for issuance to take off," Gada said.

Some of the positive trends have emerged in recent years, particularly the creation of real estate SPVs, that would remove many issues related to property transfers, Moody's said in a report. Besides, the central government is also encouraging a reduction in stamp duties.