Banks Aim to Increase Their Share of the Expanding Real Estate Market

Last fiscal year, bank loans for commercial real estate, including residential construction, almost tripled, showing a growth of 23% when not considering the HDFC and HDFC Bank merger impact. The total outstanding loans reached Rs 3.97 lakh crore.

According to property analysts, the real estate sector is expanding across various segments. In the latest quarter, the top seven property markets in the country saw a total of 74,486 apartment sales. This marks the second consecutive quarter where sales have exceeded 74,000 units, following the record-breaking 75,591 apartments sold in the December quarter. There is a demand for bank loans across segments including residential, infra-centric projects and even commercial projects like corporate offices. Banks are being risk averse They are cautious in lending to residential projects.

The real estate sector has seen a positive uptick, and this can be largely attributed to the transparency and regulatory clarity introduced by RERA (Real Estate Regulatory Authority). This has not only instilled confidence among the key stakeholders, but it has also streamlined the approval processes. As a result, it has become easier for real estate developers to deliver projects on schedule.

According to a real estate analyst, banks have been taking a proactive approach when it comes to their risk assessment, especially for residential projects. This aligns with the long-term vision of creating a more balanced and resilient real estate sector.

According to ratings agency Crisil, several factors are expected to drive strong growth for large, listed residential developers this fiscal year. These include ongoing premiumization of the housing market, favorable affordability conditions, and rising per capita incomes. Crisil estimates that these developers will see volume growth of around 10-12% this fiscal, following an estimated growth of approximately 14% on a high base in the previous fiscal year.

According to India Ratings, a ratings agency, new supply and absorption rates in the real estate market are expected to grow at 5-6% and 7-8% year-on-year respectively in the 2024-25 fiscal year. The demand for absorption of office spaces is expected to come from a variety of sectors, particularly flex space operators, the banking and financial services industry (BFSI), and engineering firms. These companies are likely to be seeking high-quality, Grade A office spaces.

According to India Ratings (Ind-Ra), rental growth in the real estate market is expected to be on the modest side, likely ranging between 3-5%, in the 2024-25 fiscal year. However, Ind-Ra believes that India will continue to benefit from the structural advantages it offers, such as a skilled talent pool and cost-effective office spaces.

By LNN (Liyaans News Network)