Real estate sector grew 61 per cent : RBI

According to RBI data, loans to the real estate sector grew 61 per cent on a year-on-year basis, with Rs 90,765 crore outstanding as on February 27, 2009. During the corresponding period in the previous year, the growth was 26.7 per cent.

During the year up to February 2009, the growth for public sector banks was a 79.1 per cent. Credit deployment by foreign banks to real estate companies registered a 41 per cent growth for the 12 months up to February 27, 2009, compared with a 36 per cent decline last year.

At the same time, growth in loans from the banking system fell from 12 per cent to 7.5 per cent. But bank executives said the growth in real estate loan flows was based on sanctions before October and growth had slowed down in the second half.

A State Bank of India executive said a majority of lending to the real estate sector took place before October 2008, the time when global financial crisis assumed menacing proportions and sapped liquidity from the system, making banks risk averse.

“During the last two years (2006-07 and 2007-08), real estate developers had launched a large number of projects which were initially funded by customers’ pre-sale contribution, with bank credit utilised over the last six months of construction,” said Amit Jain, managing director, strategic clients coverage group at Standard Chartered Bank. Without giving specific figures, Jain said his bank’s exposure to the real estate sector had increased in the fourth quarter of financial year 2009 and he expected the trend to continue as the bank met the requirements of a few of its core clients.

Real estate sector rose to about Rs 18,400 crore at end of March 2009 from Rs 15,600 crore a year ago. It has restructured real estate portfolio worth Rs 250 crore, while total restructured loans stood at Rs 4,800 crore.

Finance