Bank lending to commercial real estate moved up sharply over the period 21 May-24 September. Outstanding loans to commercial real estate from scheduled commercial banks moved up from Rs 95,659 crore on 21 May to Rs 1,01,662 crore, a rise of Rs 6,003 crore. Over the same period, the increase in outstanding housing loans (to individuals) was Rs 11,825 crore. Lending to real estate companies had slowed earlier on concerns over the dismal state of their balance sheets, but now that the companies have improved their debt-equity ratios by raising money from the capital markets, banks have once again started lending to them. But with real estate prices at stratospheric levels in cities such as Mumbai, the Reserve Bank of India (RBI) may need to raise risk weights on lending for commercial real estate.
The RBI macroeconomic review, however, remains relatively sanguine on housing prices, merely pointing out that “property prices are picking up in most tier I cities, though some slowdown is witnessed in tier II cities”. In fact, it says that growth in house prices in Mumbai is “moderate” and that the faster rise in Delhi is partly due to the Commonwealth Games.
Bank funding for non-banking financial companies also increased sharply by Rs 14,630 crore between 21 May and 24 September. Compare the increase in outstanding credit to trade, which was lower at Rs 9,621 crore over the period. Credit card balances continued to decline.
Among industrial sectors, outstanding loans to infrastructure went up by Rs 73,077 crore over the period, and this accounted for 67.4% of the increase in outstanding loans to industry as a whole. Very clearly, it is lending to infrastructure that is driving credit growth.
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