Booming Real Estate Sector Growth: Surging Bank Loans and Sales Power Ahead
Bank loans to the real estate sector growth, which includes residential construction, nearly tripled last fiscal year, growing at 23 percent. Excluding the impact of the HDFC merger with HDFC Bank, outstanding loans amounted to Rs 3.97 lakh crore. Including the merger impact, the loan growth reaches 38.9 percent, with outstanding loans as of March 31 totaling Rs 4.48 lakh crore.
Property analysts note that the real estate sector growth is evident across segments. The top seven property markets in the country registered total sales of 74,486 apartments during the quarter, marking the second consecutive quarter of sales exceeding 74,000 units after the record-breaking sales in the December quarter, which reached 75,591 apartments, according to data from JLL India.
“There is a demand for bank loans across segments, including residential, infra-centric projects, and commercial projects like corporate offices,” said Bhavik Hathi, Managing Director with Alvarez & Marsal’s Global Transaction Advisory Group. “Banks are being risk-averse and cautious in lending to residential projects.”
“This positive trend is supported by the transparency and regulatory clarity brought in by RERA, which has not only infused confidence among stakeholders but also streamlined approval processes, making it easier for developers to deliver projects on time,” said Prashant Sharma, President, NAREDCO Maharashtra. “The commitment of reputed developers to adhere to timelines and maintain quality standards has played a crucial role in attracting more institutional funding into the sector. It is imperative that we continue to foster this confidence through enhanced transparency, robust project execution, and strategic regulatory support.”
Banks have been proactive with their prudent risk assessment, especially in residential projects, aligning with the long-term vision for a more balanced and resilient real estate sector growth, according to a real estate analyst.
Ratings firm Crisil expects large, listed residential developers to build 10-12% volume growth this fiscal after an estimated growth of ~14% on a high base in fiscal 2024, citing continuing premiumization, favorable affordability, and rising per capita incomes.
India-Ratings expects new supply and absorption rates to grow at 5%-6% year-on-year (y-o-y) and 7%-8% y-o-y, respectively, in FY’25. The absorption demand is likely to come from various sectors, especially flex operators, BFSI, and engineering, seeking Grade A office spaces. Ind-Ra expects rental growth to be modest in the band of 3%-5% in FY25, due to the high supply over FY22-FY24 leading to sticky vacancies. Ind-Ra, however, believes India will continue to benefit from the structural advantages made available by its skilled talent pool and cost-effective office spaces.
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