RBI MOVES MAY NOT IMPACT PROPERTY PRICES MUCH
The recent moves by the Reserve Bank of India aimed at slowing bank exposure to the booming real estate market may have little impact on property prices or on real estate developers, leading consultants and real estate developers say.
Pritam Chivukula, National Director, Colliers International, a property services company, says, "The demand-supply mismatch in the residential market may start stabilising in the next 6-8 months but we don't estimate any significant correction in prices during this period. Only certain micro markets, which are largely investor-driven and speculative, may witness a correction."
Roughly 15 percent of the total bank credit of nearly 18,00,000-crore rupees goes towards funding the real estate sector. Of this, the bulk, more than 80 percent, goes for lending to individual borrowers for residential housing and the balance for commercial real estate.
Loans to the real estate sector are considered part of lending to "sensitive" sectors and the recent moves by RBI — including raising risk weights, increasing provisioning and hikes in policy rates — have only made banks more cautious. According to M. Balachandran, Chairman and Managing Director, Bank of India, "90 percent of our real estate exposure comprises loans given to first-time house owners. So there is no fear of an asset deflation because people acquire houses for shelter and they are going to live there and repay. As a bank we'll exercise a lot of care and restraint in funding commercial real estate. The RBI has not stipulated any ceiling. It has left it to individual banks to decide to what extent they would like to expose themselves, keeping in view the risks. We'll keep this in view and allocate resources accordingly."