Expected boom in the real estate market- Lending to increase to the service sector by the banks
Expecting a growth in the real estate sector, the banks continue to lend aggressively to the commercial real estate and the NBFC (Non-banking financial company) sector. According to the sectoral bank credit data released by RBI, the banks have slowed down on unsecured credit like credit cards, personal loans etc. as the security is low and bad debts are high. However they have increased credit to the services sector, as they are not individual loans and the loan recovery is more guaranteed than credits rendered to individuals.
Credit to the NBFC sector in April 2014 grew at 19.3 % over the previous year with a total loan outstanding of about Rs 31, 1900 crore. In April 2013, it was growing at a mere 3.9 %. In the residential commercial segment, banks are expecting a growth with year-on-year credit growth in April 2014 estimated at 19.8 % with total loan outstanding at Rs 15,2600 crore.
The services sector is another segment which has seen a huge surge in credit. It has grown at 31.6 % to Rs 37, 9100 crore from 13.3% which was the growth same time last year. Personal loans increased by 14.5 % in April 2014 as compared with the increase of 15.6 % in April 2013 indicating a downward trend.
Due to the slowdown in the economy and slack in the job market, the middle income group was apprehensive to invest in the real estate for the fear of job loss, less salary hike and high inflation. The pace in the growth of home loans declined. The total outstanding home loans at the end of April 2014 was Rs 54, 5100 crore growing at 17.1 % over the previous year.
Source- The Financial Chronicle
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