SBI will review construction finance policy for housing projects, says chairman

Chairman of the State Bank of India (SBI), CS Setty | Photo credit: PTI

Currently, the bank has an almost negligible presence in construction financing for residential projects, but it is slowly building a book on commercial real estate, especially office space.

“So how do we handle construction (financing), especially in residential real estate, is something we are working on. But it is also a fact that many of the people who have been aggressive in the residential real estate market have had their hands burned,” he said, reminding brokers of previous cases of failures due to over-indebtedness.

“The stability in terms of transparency, in terms of project management, in terms of risk management gives us some confidence… accountability is something that will give confidence to lenders like us, and you will get access to the construction financing at a very affordable price,” he said.

Regarding commercial real estate, Setty said developers must ensure potential tenants receive at least a 40 to 50 percent commitment to the upcoming office space in order to take advantage of construction financing.

“We would like a situation where we have a building but it is not occupied,” Setty said while speaking at an event organized by CREDAI, an organization of real estate developers.

When asked about the reduction in interest rates on construction loans, the SBI chief said it is related to the Marginal Cost of Funds Based Lending Rate (MCLR) and the revision of the MCLR is in sync with the interest rate on term deposits.

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

The chairman of the country’s largest lender advised NBFCs involved in the housing finance sector to reduce their operational costs so that they can lend at lower rates.

Published on December 20, 2025