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Banks Lead Commercial Real Estate Lending Despite Higher Risk Weights
A report says banks are lending much more money to commercial real estate projects.
From March to July 2026, banks added ₹42,142 crore in loans.
NBFCs, which are also lenders, reduced their lending by ₹4,284 crore.
Because NBFC lending went down, banks supplied more than 100% of the net new credit.
Building activity improved during this period, which may have increased demand for loans.
Construction output and cement production both grew faster than in the comparable previous period.
However, commercial real estate loans are considered riskier and have higher regulatory risk weights.
The report says banks’ rapid lending growth should therefore be watched carefully.
Banks added ₹42,142 crore in commercial real estate credit between March and July 2026, while NBFC credit fell by ₹4,284 crore.
Banks accounted for 111.3% of incremental commercial real estate credit because NBFC lending contracted during the period.
Outstanding commercial real estate credit stood at ₹6.7 lakh crore for banks and ₹1 lakh crore for NBFCs in July 2026.
Construction GVA grew 7.7% in Q1 FY27, while cement production rose 9.9% from April to July 2026.
Bank of Baroda Research warned that rapid lending growth warrants monitoring because commercial real estate has a higher-risk profile.
- Who
- Banks, NBFCs and Bank of Baroda Research are central to the report; the Reserve Bank of India is cited for raising risk weights.
- What
- Banks became the main source of new commercial real estate credit as NBFC lending declined between March and July 2026.
- Where
- India, as indicated by the Indian-rupee figures and references to the Reserve Bank of India.
- When
- The lending comparison covers March to July 2026; the report also gives outstanding balances as of July 2026.
- Why
- Improving construction activity may be supporting demand for credit, while the segment’s higher risk profile prompted a warning to monitor the expansion.
Reasons for Continued Lending
Reasons for Caution
Construction demand
Reasons for Continued Lending
Improving construction activity, including stronger construction GVA and cement production, may be creating legitimate demand for commercial real estate credit.
Reasons for Caution
The report cautions that stronger demand does not remove the risks associated with rapid credit expansion in commercial real estate.
Bank exposure
Reasons for Continued Lending
Banks have continued expanding their exposure despite higher risk weights, supplying credit as NBFC lending contracted.
Reasons for Caution
The concentration of new lending in banks makes the segment important to monitor because commercial real estate loans carry a higher risk categorisation.
Key facts
- Bank credit added
- ₹42,142 crore between March and July 2026
- NBFC credit change
- Contracted by ₹4,284 crore during the same period
- Banks’ incremental share
- 111.3% of combined incremental commercial real estate credit
- Bank outstanding credit
- ₹6.7 lakh crore as of July 2026
- NBFC outstanding credit
- ₹1 lakh crore as of July 2026
- Construction GVA growth
- 7.7% in Q1 FY27, compared with 5.2% in Q1 FY26
- Cement production growth
- 9.9% from April to July 2026, compared with 8.2% a year earlier
Sources
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