News Updates
RBI data on bank credit to commercial real estate
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According to the latest data avail- able from the Reserve Bank of In- dia, the outstanding for commer- cial real estate is Rs 1187.1 billion as of January 2012, a growth of 12.2 per cent over the previous year. Although this rate is lower than the growth figure of 19.9 per cent in the same period the previ- ous year, the double-digit growth stands in sharp contrast to the claims from public-listed realty firms who say bank lending has shrunk considerably.
A slowdown in bank credit to commercial real estate devel- opment is not fresh news. But official data suggest that lending to realty sector is still growing in double digits.
According to a research report by IDFC’s Institutional Securities
team last December, bank and NBFC loans to developers have increased 15 per cent to Rs 1.8 trillion for the 12 months ended September 11 in spite of higher interest rates and the RBI’s efforts to curb lending to the sector. Of this, loans to unlisted developers accounted for more than 72 per cent of the total.
Central to the theme of continued lending to real estate develop- ment are the low-lying, unlisted property developers of the coun- try – a crop of realtors who have always been on the sidelines of the big Indian realty story but who are slowly yet surely climbing up the ladder for a larger share of bank loans.
One reason for such a shift could be the hard targets that listed
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realty firms chase due to the pres- sure of being listed, with compul- sory quarterly disclosures. Add to it the size of the firm and pres- sure points will become clearer. A listed firm usually places big- ger bets with larger projects and when the market faces turbu- lence, project execution becomes a problem. This reverberates with pending projects and drying up of bank credit.
Even as most unlisted private developers are small realtors, there are some large private groups in different regions of the country. Given the huge set of private developers, even private equity developers have been betting on projects sponsored by such realtors.
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