Role Of Bank Financing In The Real Estate Development Projects In India

Banks have always been key contributors to the development and economic growth of a country

. Their role has been essentially to channelise the funds in important sectors of the economy as per the policy of the government. The growth of the realty sector in India is attributed to the massive contribution of the banking sector in providing the project finance to the private players as well as loans to the eligible people for buying their dream home. The residential flats such as BPTP Princess Park Faridabad have been the prime focus of this wave of development since the aim is to provide the housing for people of all sections of the society.

Princess Park Faridabad and other such new and old housing projects have been financed by a number of banks. The banks evaluate the projects on individual basis after verifying the complete documents and approvals from the concerned authorities. Once the projects are approved by the banks, the customers can avail of the loans on the basis of their respective eligibility.

The banks provide the loans on the basis of floating and fixed rates of interest. Usually, the floating rate of interest is kept lower than the fixed rate and people generally avail of the floating rate of interest on the loans. The rates of interests on housing loans follow the indications of the central bank, the Reserve Bank of India, which influences these rates through its monetary policy. The floating rates keep on changing in line with the RBI indications but the fixed rates remain same all through the loan period.

By providing the loans, the banks make it possible for the individuals to own the flats by paying the instalments on monthly basis from their regular earnings rather than waiting for the accumulation of required sums for buying the property. This has facilitated the credit off take for the banks as well as benefited the public who can buy their dream home with ease. Despite the role of banks in financing the housing projects and the retail finance given to customers, it is not easy to avail of the home loans at all times. The banks might tighten the eligibility conditions for the loan off-take when there is too much liquidity in the markets and there are inflationary tendencies. This might cause inconvenience to the home buyers. However, too tight eligibility conditions would defeat the very purpose of housing the masses. For the banks, it is a tight rope walk to maintain the balance.

As can be seen, the banks have given impetus to the realty sectors by making it possible for the people to own the homes from their monthly regular earnings. At the same time, the banks have ensured that the ensuing bad debts remain within the manageable limits.

by: kamal bhatt

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