Bank credit to Indian real Estate sector has gone up 24.6% for the financial year ended March 2011, higher than the overall credit growth reported by banks at 22.6% .Real Estate was one of the highest sectoral exposures by banks after infrastructure.
India real estate loans constituted 17.7% of total loans in March 2011. For the private and foreign banks, it formed nearly 30% of their total exposure to real estate during the financial year 2010-11
Reserve Bank of India (RBI) raised some concerns on the raised high exposure to the real estate sector following a large amount of NPA (Non-Performing Asset) formation.
According to the RBI report “The rate of growth of NPAs in the real estate segment at 19.8%t was also higher than the overall NPA growth rate of 14.8%. In particular, the NPAs in the commercial real estate segment grew at 70.3% as at end March 2011, most of the impairment taking place in PSU banks,” .
To stem the tide of rising NPAs, RBI increased provisions for exposures to prevent excessive leveraging.
Residential mortgages and the commercial real estate both registered a growth rate of nearly 24%.
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