State Bank of India (SBI) remains hugely optimistic about the residential housing sector and will be emphasizing hugely on its residential housing business going forward as per reports. SBI is bullish about the sector ever since the introduction of new regulatory laws like RERA which offers more transparency and stable views with regard to overall cash flows. The new real estate guidelines and their benefits for buyers should spark greater development and sales volumes in turn. Post implementation of RERA, balance sheets of more real estate developers should become eligible for funding. SBI will always look at this as a major area of opportunity in terms of credit growth.
The housing and real estate business will be held under the home loan category according to experts. SBI already has its outstanding home loan book touching Rs. 2.9 trillion which is the biggest in the entire country. SBI is looking to come up with newer and more innovative home loan solutions for its customers and there may soon be a help desk for real estate developers. SBI has also signed its MoU with CREDAI (Confederation of Real Estate Developers Associations of India) and a government body in Maharashtra for deploying funding for projects undertaken by the slum rehabilitation authority in the state.
Many real estate developers were not deemed eligible previously due to low transparency pertaining to approvals, fund usage, completion time for projects and regulatory compliances. With more predictability for the bank in terms of completion of projects, SBI is now looking to fund projects in the affordable housing segment which are hugely in demand. Real estate developers now cater to end-users mostly and then come investors. RERA has put paid to the previous practices of land acquisition and shifting money across multiple projects. RERA mandates builders to have escrow accounts and use funds for construction only. The present market is end-user dominated and there is a stable market for banks like SBI at present. The high number of end users means better asset quality. In fact, 90% of home loan customers at SBI are first time borrowers and delinquency levels are on the lower side since people fear that defaults may cause them to lose the property in question.