Daijiworld Media Network - Mumbai
Mumbai, Dec 20: State Bank of India (SBI) Chairman C S Setty on Saturday said the country’s largest lender will reassess its policy on providing construction finance for residential real estate projects, while making it clear that transparency, accountability and sound project management will be crucial factors in determining interest rates.
Speaking at an event organised by real estate developers’ body CREDAI, Setty said SBI currently has a negligible presence in residential construction finance, though it has been gradually building its exposure in commercial real estate, particularly office spaces.
“We are working on how to approach construction finance, especially for residential real estate. But it is also a fact that many who were aggressive in this segment in the past have burned their hands,” he said, cautioning developers against overleveraging and poor risk management.
The SBI chief stressed that lenders’ confidence depends largely on the stability of projects. “Transparency, proper project management and effective risk management give us confidence. Accountability is what will eventually enable developers to access construction finance at more affordable costs,” he added.
On commercial real estate funding, Setty said SBI would prefer developers to secure at least 40–50 per cent tenant commitments before availing construction finance for office projects. “We would not like a situation where a building is constructed but remains unoccupied,” he said.
Addressing queries on interest rates for construction finance, Setty explained that rates are linked to the Marginal Cost of Funds-based Lending Rate (MCLR), which is revised in line with changes in term deposit rates. Earlier this month, SBI revised its MCLR and fixed deposit rates for select tenures.
The SBI chairman also advised non-banking financial companies (NBFCs) operating in the housing finance space to reduce their operational costs so they can offer loans at more competitive rates.
His remarks indicate a cautious but open approach by SBI towards expanding its role in real estate construction finance, with a strong emphasis on discipline and long-term sustainability.