NB Explains | Bank credit outstanding to real estate rises to record Rs 28 lakh crore in July: RBI

New Delhi, Sept 4: Bank credit to the realty sector, including housing and commercial real estate, witnessed nearly 38 percent 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 commercial real estate – considered a hot sector — increased by 38.1 percent to Rs 4.07 lakh crore. Despite the rise in interest rates, the credit outstanding in housing (including priority sector housing) rose 37.4 percent annually in July to Rs 24.28 lakh crore, showed the RBI's data on 'Sectoral Deployment of Bank Credit – July 2023'.

 

It is evident from the Reserve Bank's loan outstanding data as well as property consultants data on housing sales and new launches across major cities that activities in the real estate sector are moving at a fast pace.

 

Another set of RBI data showed that 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.

 

 

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

 

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 added.

 

Das said this double-digit growth is considered quite robust given the challenging economic scenario globally. "The double-digit growth can be attributed to the rising demand for housing which is reflected in the robust sales volume recorded till June 2023," he added.

 

Aman Sarin, Director & CEO, of 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.

 

 

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.

 

Puri of Anarock said the demand momentum is likely to continue, and the real estate sector is likely to scale newer heights. As per the Anarock data, the total housing sales increased to 2,28,860 units during January-June this year across seven major cities from 1,84,000 units in the year-ago period.

 

These cities are -- Delhi-NCR, Mumbai Metropolitan Region (MMR), Bengaluru, Hyderabad, Chennai, Pune and Kolkata. This is despite the rise in interest rates on home loans by around 250 basis points in the last one and a half years and also increase in prices of residential properties after the COVID pandemic.