5 Lakh Homes, ₹4.48 Lakh Crore: The Time Bomb of Indian Banks

An unusually high number of stalled real estate projects in major Indian cities are causing concern for lenders.

It is shocking that the real estate sector, which played a crucial role in protecting India’s commercial and employment markets during the COVID-19 period, is now in crisis.

Bank officials have warned that loans given to stalled real estate projects by Indian banks could become non-performing assets (NPAs) over time.

Real Estate

In India, the lending business on real estate is gradually increasing, as there is a high demand for commercial and residential spaces in the post-pandemic economic scenario, necessitating substantial financial investment in this sector.

Loans

However, a major concern for banks is the increasing number of stalled real estate projects. If these loans turn bad, they will become NPAs, making it impossible to recover the funds.

500,000 Homes

According to a study by the real estate consultancy firm ANAROCK, about 500,000 homes worth ₹4.48 lakh crore are stalled in the real estate markets of seven major metro cities in the country.

7 Cities

The NCR and Mumbai Metropolitan Region (MMR) alone account for approximately 77% of these stalled projects. Similarly, Pune accounts for 9%, Kolkata for 5%, and the southern metros of Bengaluru, Chennai, and Hyderabad together account for the remaining 9%.

Real Estate

For several years, banks have consistently increased their lending exposure to the real estate sector. For instance, according to CRISIL data, bank lending exposure to commercial real estate was ₹2.91 lakh crore in FY22, compared to ₹2.56 lakh crore in FY19 and ₹2.35 lakh crore in FY17.