The Hindu Business Line : Realty got plenty of bank money last fiscal

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Realty got plenty of bank money last fiscal

Home loans account for much of the funding

N.S.Vageesh

Chennai, Aug.22 The real estate sector grabbed bank money last year like never before.

Of course, the bulk of the money was given to the housing loan borrowers. Higher property prices and higher interest rates, especially towards the last quarter of the last fiscal, also saw higher levels of banks’ exposure to the real estate sector.

Real estate is considered a sensitive sector to lend to, and banks are required to disclose their exposure to this segment separately.

With few exceptions, almost all the major banks in the country increased their home loans and loans to commercial property sharply. ICICI bank and HDFC Bank nearly doubled their exposure to both the home and commercial real estate sectors.

The regulator, the Reserve Bank of India, had cried itself hoarse about the need for banks to be cautious about the real estate boom and monitor their exposure carefully.

The RBI tried to stem the tide by requiring banks to set aside more capital for such lending. It increased the risk weights and gradually increased the provisions for bank exposure in these sectors.

The growth in business last fiscal was however so strong, and the base still comparatively small, that banks were emboldened to increase their exposure, notwithstanding raised regulatory eyebrows.

This fiscal, there have been signs of a slowdown for the last few months. Banks say they are becoming cautious and choosy and that they are in a “consolidation” mode. We’ll have to wait and see.

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