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Credit outstanding to real estate rises 38% to Rs 28 lakh crore in July: RBI | Business News

Bank credit to realty sector, including housing and commercial real estate, witnessed nearly 38 per cent annual growth in July, taking the loan outstanding to the realty sector to a record Rs 28.35 lakh crore, according to the latest Reserve Bank of India data.

The credit outstanding to the commercial real estate – considered as a hot sector — increased by 38.1 per cent to Rs 4.07 lakh crore.

Despite the rise in interest rates, the credit outstanding in housing (including priority sector housing) rose 37.4 per cent annually in July to Rs 24.28 lakh crore, the RBI data shows.

Aman Sarin, Director & CEO, Anant Raj Ltd, said the growth in credit indicates that the real estate sector is growing and people are investing in the sector. “This also indicates that the banking sector is positive about real estate and willing to provide capital for construction of commercial and housing projects,” Sarin said.

A significant driver of housing demand is the rising importance of property ownership, buoyed by consumer confidence in the broader economic climate, Sarin said.

Festive offer

Real estate developers and consultants exuded confidence that the sales momentum in the real estate sector will continue. They are also bullish about bumper sales in the upcoming festive season. Mohit Jain, Managing Director, Krisumi Corporation, said: “The festive season typically brings optimism and increased real estate transactions.” The residential real estate sector is presently experiencing robust growth, and this trend is expected to persist, Jain said.

The concept of homeownership has evolved, with people viewing houses not just as a necessity but also as a lifestyle choice, an investment, and a means to create assets for future generations. The demand for superior housing is anticipated to keep rising in the foreseeable future, Jain said.

Sankey Prasad, CMD, Colliers India, said a major factor putting the Indian realty on a high growth trajectory is India’s rapid GDP growth which is growing upwards of 6-7% a year, far higher than developed countries such as the US and UK where the economy has inched closer towards slowdown. “Initiatives such as Make in India, Production Linked Incentive Scheme and Smart Cities and policy nudges in the form of Real Estate Regulatory Act and single-window clearance have played a crucial role in eliminating roadblocks, thereby fast-tracking growth of the industry,” Prasad said.

Prasad said the impact of global economic sluggishness is expected to be a mixed bag for real estate in the near term due to rising interest rates and slowdown in demand. The long-term demand is expected to remain strong as housing has become one of the most important assets post COVID pandemic, he said.

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Anarock Chairman Anuj Puri said the impressive loan growth in the real estate sector is a function of a large-scale demand revival across the board.
“The commercial office segment was reeling under the pandemic’s pressure last year as employers were contemplating strategies around complete work from the office, work from home, or a hybrid model. However, as the situation gained normalcy, employees returned to offices and the demand for good quality commercial offices is high this year,” he said.
The RBI’s All India HPI growth (y-o-y) inched up to 5.1 per cent in the first quarter of 2023-24 from 4.6 per cent in the previous quarter and 3.4 per cent a year ago. Annual growth in HPI varied widely across the cities, ranging from the high growth of 14.9 per cent (Delhi) to a contraction of 6.6 per cent (Kolkata). On a sequential (q-o-q) basis, all India HPI increased by 2.6 per cent in Q1:2023-24. Eight of the ten cities witnessed housing registration price increase vis-a-vis the previous quarter, the RBI said.

In 2022, Puri said housing sales across top 7 cities were 54 per cent higher than the previous year. In January-June 2023, sales have already reached 63 per cent of the previous year, indicating the sustained demand. The demand remained undeterred despite a steady rise in home loan interest rates, he said.

Samantak Das, Executive Director and Head of Research, JLL India, said the RBI’s latest sectoral credit data showed a remarkably high growth in bank lending to the real estate sector in July 2023. “This is the impact of the merger of a non-banking financial company with a bank. On excluding the impact of the merger, lending to commercial real estate in July 2023 increased by 12 per cent y-o-y and housing loans increased by 13 per cent y-o-y during the same time frame,” he said.


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