Wednesday, November 4, 2009

Availablity and cost of bank credit to impact real estate

Posted by Christina Dove

While the recent quarterly review of the monetary policy has kept the policy rates unchanged, the availability and also cost of bank credit are
likely to impact one sector;commercial real estate (CRE). As equities and real estate are vulnerable to asset bubbles, bank lending to these segments is under close regulatory scrutiny.

This explains the RBI move to increase provisioning requirements for CRE lending to 1% as against 0.4% for other categories. RBI attributes this measure to "large increase in credit to commercial real estate over the last one year and the extent of restructured advances in this sector".

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