Credit policy and the real estate sector

The Reserve Bank of India’s latest annual Credit Policy for the year 2006-07 may turn out to be the proverbial wet blanket to the booming real estate in India, says K Sukumaran.

The last few years have witnessed tremendous growth in the real estate sector in the country.

A tour of the outer ring road in Bangalore alone will convince one about this phenomenon. While the earlier development was rather sporadic and limited to the eastern and southern areas of Bangalore where the IT industry spread its wings, the growth can now be seen everywhere.

The fillip to this growth came not only from the increasing demand for housing and office premises from the IT industry, but also due to the liberal credit support the sector received from the lending institutions, especially Commercial Banks.