A study of growth in advances to real estate of 26 public sector banks (PSBs) and 15 private sector banks during 2010-11 and 2007-08 reveals that in the case of PSBs loans decreased from 29.4% during 2007-08 to 14.3% during 2009-10 and increased to 23.4% during 2010-11. On the other hand the growth of advances to real estate sector of private banks steadily rose from 9.8% during 2007-08 to 28.9% during 2010-11.
An analyst from a broking firm said: The real estate both residential as well as commercial has been growing rapidly over the last few years. The rising disposable income and increasing number of nuclear families is driving the demand for residential real estate. On the commercial space, the increasing participation of retail giants in setting up malls and related activities centres have resulted in rapid growth in this sector. So banks have been aggressively lending to this segments.
Among the private banks, significant increase in the advances to real estate was in the case of Dhanalaxmi Bank, where it increased from R340 crore during 2007-08 to R1,086 crore during 2010-11. This can be explained from its performance.
The total advances of Dhanalaxmi Bank increased by 331.2 % to R9,065 crore during 2010-11 from R2,102 crore during 2007-08. The ratio of advances to real estate to total advances decreased from 16.16% to 11.98%. But from the level of 2009-10 the ratio increased significantly.
In DCBs case, the advances to real estate increased from R384 crore to R694 crore.
Kotak Mahindra Bank had advances to real estate of R3,850 crore during 2007-08 which rose to R8,988 crore during 2010-11. ICICI Bank, the largest private sector banks, showed a decrease of 4.4% in its advances to real estate during 2010-11 from the level of 2007-08.
The ratio of real estate exposure to total advances of private sector banks decreased from 26.69% during 2007-08 to 23.61% during 2010-11. On the other hand, PSBs had higher positive growth in advances to real estate compared to private banks during all the four years except 2010-11. Among the 26 PSBs , SBI and IOB showed more than 100% increase in their advances to real estate during the year 2010-11 from the level of 2007-08.
Between 2010-11 and 2007-08, advances to real estate of 26 PSBs increased by 41.1% to R4.74 lakh crore from R3.36 lakh crore. Here also the ratio of exposure of real estate to total advances ratio decreased from 15.75% during 2007-08 to 14.34% during 2010-11. In 2010-11, the highest advances to real estate to total advances ratio was observed in the case of Vijaya Bank, followed by SBT and IDBI Bank.
The total advances to real estate sector of Vijaya Bank increased by 30% to R10,197 crore during 2010-11 from the level of R7,843 crore during 2007-08. And the ratio of advances to real estate to total advances decreased from 24.75% to 20.93% during the study period.