SBI to revisit construction finance policy for housing projects: Chairman

State Bank of India (SBI) Chairman C S Setty on Saturday said that the bank will reassess its policy on construction finance for residential real estate, but stressed that accountability and transparency will be key factors in determining interest rates for such loans.

At present, the bank has almost negligible presence in construction finance for housing projects, but it is slowly building a book on commercial real estate, especially office space.

"So how do we work out on the construction (finance), particularly on the residential real estate, is something that we are working on. But it is also a fact that many of the people who have been aggressive on the residential real estate market have burned their hands," he said, while reminding realtors of past cases of failures due to overleveraging.

 

"The stability in terms of transparency, in terms of project management, in terms of risk management, gives us some confidence....accountability is something what is going to give confidence to the lenders like us, and you will be accessing the construction finance at a much affordable cost," he said.

With regard to commercial real estate, Setty said developers should ensure at least 40-50 per cent commitment from potential tenants for the upcoming office space to avail construction finance.

"We would like a situation where we have a building but not occupied," Setty said while speaking at an event organised by CREDAI, a body of real estate developers.

Asked about the reduction in interest rate on construction finance, SBI chief said it is linked to Marginal Cost of Funds based Lending Rate (MCLR) and revision in MCLR happens in sync with term deposit rates.

Earlier this month, the bank revised both MCLR and fixed deposit rates for select buckets.

The chairman of the country's biggest lender advised NBFCs engaged in the housing finance sector to bring down their operational cost so that they can provide loans at cheaper rates.