A large-scale demand revival for housing has pushed bank credit to the real estate sector to an impressive annual growth of nearly 38% in July, RBI’s latest data showed.

The loan outstanding to the realty sector touched a record of Rs 28 lakh crore, according to the data provided by the Reserve Bank of India (RBI). This includes bank credit to housing as well as commercial real estate.

Property consultants have also said that housing sales and new launches across major cities are progressing at a fast pace.

As per RBI data, the credit outstanding in housing (including priority sector housing) rose 37.4% annually in July crossing Rs 24.28 lakh crore.

The credit outstanding to the commercial real estate increased by 38.1% to Rs 4.07 lakh crore, according to the RBI's data on 'Sectoral Deployment of Bank Credit – July 2023'.

The demand for good quality commercial offices is high this year, after being impacted during the Covid-19 outbreak. 

"The commercial office segment was reeling under the pandemic's pressure last year as employers were contemplating strategies around complete work from the office, work from home, or a hybrid model. However, as the situation gained normalcy, employees returned to offices and the demand for good quality commercial offices is high this year," PTI quoted Anarock chairman Anuj Puri as saying.

Another set of RBI data showed that All India HPI growth (y-o-y) inched up to 5.1% in the first quarter of 2023-24 from 4.6% in the previous quarter and 3.4% a year ago.

In 2022, Puri said housing sales across top 7 cities were 54% higher than the previous year. In January-June 2023, sales have already reached 63% of the previous year, indicating the sustained demand.

The demand remained undeterred despite a steady rise in home loan interest rates, he added.

The RBI's latest sectoral credit data showed a remarkably high growth in bank lending to the real estate sector in July 2023, said Samantak Das, executive director and head of research, JLL India.

"This is the impact of the merger of a non-banking financial company with a bank. On excluding the impact of the merger, lending to commercial real estate in July 2023 increased by ~12% y-o-y and housing loans increased by ~13% y-o-y during the same time frame," PTI quoted Das as saying.

Das said this double-digit growth is considered quite robust given the challenging economic scenario globally.

"The double-digit growth can be attributed to the rising demand for housing which is reflected in the robust sales volume recorded till June 2023," he added.

As per the Anarock data, the total housing sales increased to 2,28,860 units during January-June this year across seven major cities from 1,84,000 units in the year-ago period.

These cities are: Delhi-NCR; Mumbai Metropolitan Region (MMR); Bengaluru; Hyderabad; Chennai; Pune; and Kolkata.

This is despite the rise in interest rates on home loans by around 250 basis points in the last one and a half years and also increase in prices of residential properties after the Covid pandemic.