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LENDING & CREDIT | Cesar Tordesillas, India

Growth in Indian realty loans drops to 4%

The waning interest of the Indian banking sector towards real estate lending is reflected in the loan exposure growth rate, which declined to 4 percent from 23 percent last year.

According to a report by the Reserve Bank of India, the outstanding bank credit to the realty sector stood at Rs 5,31,300 crore till June this year and out of that the home loan segment accounted for 78 per cent.

The remaining 22 per cent is to the real estate developers.

"The lower growth had a significant impact on demand for commercial and residential property during the last year. While the initial signal was decline in absorption, it is fewer project launches now," said the RBI.

The report further said during the five-year period between FY08-FY12, the sales value of the real estate sector declined by 15 per cent but net profit fell by almost 67 per cent primarily on account of interest cost going up five fold.

"Even while property prices rose during this period, the industry has not managed to surpass the FY'08 sales value clearly indicating the larger dent on sales volume," it said.

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