Difficult to rely on authorities’ approval for sanctioning realty loans, bankers say on Supertech mess

Bankers are maintaining a cautious watch on the realty sector as the Supreme Court ordered demolition of Supertech twin towers nears its date.

The apex court had ruled in August last year that the illegal construction happened with the knowledge of people within the state and district administration.

“We do not have any knowledge about the case but how do consumers and lenders rely on approvals given by authorities if these approvals run the risk of being countermanded by courts?” asked a senior executive at a mid-sized private bank, seeking anonymity.

The construction of Supertech’s twin towers with provision for 915 flats and shops was done in collusion with Noida Authority, the Supreme Court had said in its order on August 31, 2021.

What do bankers say?

A senior private sector bank official said that though the planned demolition adds to the negative news flow regarding the realty sector, the broader industry-level credit outlook for the current fiscal appears positive.

“The overall credit outlook remains buoyant. If one looks at the data from the last three months, income levels are rising and so are repayments. Delinquencies are under control,” the person said, adding that this might also be a factor of post-pandemic demand.

“There is a growth in registration of properties presently. That may be partially attributable to the lack of credit offtake in the last three years. We are seeing pent-up demand,” the banker said.

As per the latest Reserve Bank of India (RBI) sectoral credit data, banks’ non-food credit registered a growth of 13.7 per cent year-on-year (y-o-y) in June 2022, compared with 4.9 per cent a year ago.

Outstanding credit to the real estate sector stood at Rs 2.98 lakh crore as on June 17, up 3.3 per cent y-o-y, indicating banks’ risk averseness in lending to the sector, analysts said.

“We do not have any special ways of ascertaining whether we can depend on authorities’ approvals for sanctioning of loans…,” the banker said.