Banks Cautious Approach Hurting AP Realty Sector

While there is a growing demand for houses in the state, banks are taking a cautious approach in approving home loans. This in turn is hurting the prospects of the realty sector. Even for approved loans, banks have reduced ‘loan-to-value’ (LTV) by around 40% compared to pre-pandemic times. With tighter norms imposed by banks, realtors in Amaravati are placed in a peculiar situation. On the one hand, the demand for houses has seen a rise, especially for low-cost and affordable housing; on the other hand banks are wary of giving out loans making realtors unable to convert enquiries into transactions. T Vamsi Krishna, general secretary of Builders Association of India (BAI), Amaravati chapter, said that bankers would earlier approve loans on the basis of future growth prospects of the area. But now, they are considering minimum realisation value of the property while issuing home loans. Property valuations have come down drastically in Amaravati, Vijayawada and Guntur due to the prevailing uncertainly over the capital issue. The Covid-19 induced lockdown further brought down valuations. The corrective measures taken by Reserve Bank of India (RBI) have caused interest rates to plummet and have thereby led to an increased demand from home buyers. The cautious approach adopted by bankers is creating a huge gap between LTV offered and requirements of home buyers. Bankers are wary of giving out easy loans at low margins for fear of NPAs (non-performing assets). Bankers are worried of an increase in NPAs in the realty sector as many projects have come to a grinding halt due to the uncertainly over the capital issue and the pandemic.