Real estate sector is about to gain a small boost from the Finance Ministry. Finance Ministry plans to support the real estate sector by helping the real estate builders to secure bank loans.
Real estate sector will be boosted as the Finance Ministry plans to offer bank loans to the builders who have stalled projects at hand. The decision is expected to be made within a couple of weeks.
Latest RBI data show that the bank credit to the residential sector has grown by mere 12.1 % on year on year basis. This, in fact, is lower than the 15.9 % aggregate growth rate of bank credit.
A senior bank officer in a private sector bank said that the bank aims to provide loans to the stalled residential projects. With this loan the real estate builders will be able to complete their residential projects. However it seems that the bank loans will be available only to the residential projects and not for commercial projects.
Available sources say that the Indian Banks’ Association – the apex organization of banks, has submitted a report to the finance minister P Chidambaram. P Chidambaram had held a meeting last month to discuss the problem. Heads of public sector banks and financial institutions attended the meeting.
A senior official revealed that they are looking for number of options to sort out the problem. He added that a solution would be found out soon. Revision of lending – norms and providing loans for some specified projects were believed to be suggested.
Last day the chairman and managing director of National Housing Bank, Mr. RV Verma announced that National Housing Bank will provide a sum of Rs.9000 Cr as home loans.
Mr. Chidambaram had earlier raised the issue of revitalization of real estate sector. Real estate sector is one of the largest employment creators in India. He had suggested to the real estate builders to lower the prices. However the suggestion to lower the prices was first discarded by them. Many of them opposed to lower their prices saying that they had invested highly.
Meanwhile, India witnessed the slowest economic growth of this decade. The second quarter of this fiscal year the economic growth rate was a mere 5.3 %. Real estate sector’s growth was rated 6.7 %. This rate is higher than the previous year’s 6.3%. The revival of real estate sector will improve the related industries as well. Cement and steel industries will grow along with the real estate sector.