Due to the continuous oversupply of the commercial projects, the signs of pickup in demand in the sector seems becoming dull and thus banks are also backing out from lending to real estate firms.
As compared to the residential sector, the demand growth of the commercial sector in past few months is much behind that of the residential one. Not only the office spaces are yet to be occupied, but also the ready projects are unable to seek buyers. This lack of buyer’s interest in the office spaces, multiplexes and retail has forced banks to back off lending to commercial sector.
Other than the uncertain demand scenario for commercial space, banks also have to look and take care of the rising realty sector debt on their ledgers. Ranjan Dhawan, the chief general manager of Punjab National Bank (PNB) said that since some of the banks have reached their sectoral exposure limit, they cannot now get into more lending. He also added that although PNB is still in is exposure limit, still it would get into some other lending only after thorough due-diligence.