Bank Lending To Developers Rises By 6.3%: RBI

Bank Lending To Developers Rises By 6.3%: RBI

Bank Lending To Developers Rises By 6.3%: RBI

Financial institutions are now becoming more and more confident about lending to developers across the country especially those who have projects approved by the Real Estate Regulatory Authority (RERA). The latest numbers released by the Reserve Bank of India (RBI) confirm.

According to RBI data, bank funding to developers has witnessed a 6.3 per cent rise over the previous year with outstanding loans to the sector at the end of August 2018 standing at Rs 1,87,200 crore. The loans at the same time last year had witnessed a drop of 3.1 per cent. However these numbers are only a small percentage of the total outstanding loans by banks – Rs 92,47,786 crore growing at 12.38 per cent – the money that will be pumped into the real estate sector is only expected to grow.

 RERA impact

The projects in states that have set up and implemented RERA are witnessing a rise in confidence from the lenders. RERA-approved projects allow banks to invest in them knowing the chances of delays or stalling of projects are bleak. The registered projects have been duly checked, their paperwork intact and are following the timelines. Moreover, such projects have their total outlay checked by chartered accountants, architects and engineers, and the cost and funding is estimated clearly. Maharashtra was one of the first states to implement RERA rules. 

State Bank of India is planning to introduce a special scheme to finance developers for selected projects.

Changing strategies

The developers are now adopting strategies to lower their debts, too, adding to the confidence financial institutions now have in them. The developers are now looking at selling their completed projects (inventory) and not projects in the pre-launch stages. The aim is to lower debts by selling inventory first.

One such example is DLF, that has an inventory of 14,000 apartments. According to the company, the revenue generated from selling the inventory will fund their future projects and also bring down the debt.

DLF recently received a funding of $1.5 billion from Singapore’s sovereign wealth fund, GIC,  for a stake in its rental arm, DLF Cyber City Developers.

Last Updated: Thu Oct 18 2018

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