The credit outstanding in housing (including priority sector housing) rose 37.4% annually in July crossing Rs 24.28 lakh crore, according to the RBI. File
| Photo Credit: K.V.S. GIRI

Bank credit to housing as well as commercial real estate witnessed a nearly 38 per cent annual growth in July, taking the loan outstanding to the realty sector to a record Rs 28 lakh crore, as per the latest RBI data.

It is evident from the Reserve Bank’s loan outstanding data as well as property consultants data on housing sales and new launches across major cities that the real estate sector is moving at a fast pace.

Huge loan growth

The credit outstanding in housing (including priority sector housing) rose 37.4 per cent annually in July crossing Rs 24.28 lakh crore, according to the RBI’s data on ‘Sectoral Deployment of Bank Credit – July 2023’.

The credit outstanding to commercial real estate increased by 38.1 per cent to Rs 4.07 lakh crore.

Commenting on the RBI data, Anarock Chairman Anuj Puri said the impressive loan growth in the real estate sector is a function of a large-scale demand revival across the board.

“The commercial office segment was reeling under the pandemic last year as employers studied strategies around complete work from the office, work from home, or a hybrid model. However, as the situation gained normalcy, employees returned to offices and the demand for good quality commercial offices is high this year,” he said.

House prices inch up

Another set of RBI data showed that All India HPI growth (y-o-y) inched up to 5.1 per cent in the first quarter of 2023-24 from 4.6 per cent in the previous quarter and 3.4 per cent a year ago.

In 2022, Puri said housing sales across top 7 cities were 54 per cent higher than the previous year. In January-June 2023, sales have already reached 63 per cent of the previous year, indicating the sustained demand.

The demand remained undeterred despite a steady rise in home loan interest rates, he added.

Samantak Das, Executive Director and Head of Research, JLL India, said the RBI’s latest sectoral credit data showed a remarkably high growth in bank lending to the real estate sector in July 2023.

“This is the impact of the merger of a non-banking financial company with a bank. On excluding the impact of the merger, lending to commercial real estate in July 2023 increased by ~12 per cent y-o-y and housing loans increased by ~13 per cent y-o-y during the same time frame,” he added.

Das said this double digit growth is considered quite robust given the challenging economic scenario globally.

The double-digit growth can be attributed to the rising demand for housing which is reflected in the robust sales volume recorded till June 2023,” he added.

Aman Sarin, Director & CEO, Anant Raj Ltd, said the growth in credit indicates that the real estate sector is growing and people are investing in the sector.

“This also indicates that the banking sector is positive about real estate and willing to provide capital for construction of commercial and housing projects,” Sarin said.

Developers confident

Real estate developers and consultants exuded confidence that the sales momentum in the real estate sector will continue. They are also bullish about bumper sales in the upcoming festive season.

Mohit Jain, Managing Director, Krisumi Corporation, said: “The festive season typically brings optimism and increased real estate transactions.” The residential real estate sector is presently experiencing robust growth, and this trend is expected to persist, Jain said.

Puri of Anarock said the demand momentum is likely to continue, and the real estate sector is likely to scale newer heights.

As per the Anarock data, the total housing sales increased to 2,28,860 units during January-June this year across seven major cities from 1,84,000 units in the year-ago period.

These cities are — Delhi-NCR, Mumbai Metropolitan Region (MMR), Bengaluru, Hyderabad, Chennai, Pune and Kolkata.

This is despite the rise in interest rates on home loans by around 250 basis points in the last one and a half years and also increase in prices of residential properties after the COVID pandemic.