Feeling a correction in the property sector, commercial banks have become selective in lending to new residential and commercial property projects. In addition to the increase in lending rates, some banks have asked the promoters to increase their share in financing projects in an attempt to mitigate the associated risks. Economic uncertainty and inflation is likely to influence the price of real estate, which is already evident in certain pockets in Mumbai. The decline indicates tough times ahead for the real estate sector, according to bankers. The banks have already turned selective in making new proposals for funding.
The Reserve Bank of India has already declared the real estate space as a sensitive sector as part of its prudential standards. The sector attracted a higher risk weightage (banks have set aside the higher amount of capital for real estate exposure) and the loan is being closely monitored.
It is quite evident that the bad economic situation prevailing in india has started affecting the real estate sector also. Will this decision by finance majors affect indian real estate industry? Let us see what happens.
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