Reserve Bank may tighten its grip on the country’s real estate sector further in its forthcoming mid-term review of the monetary policy on October 30, Ernst and Young said in a study on the country’s real estate sector.

“With real estate prices continuing to appreciate, we foresee that the (RBI’s) policy baton may tighten in near future as well,” the study revealed. This will leave real estate developers with little option but to resort to more expensive financing options, it added.

Already concerned about the growing exposure of scheduled commercial banks (SCBs), the apex bank has clamped down on foreign debt into the real estate sector, hiking risk weight for home loans and increasing provisioning requirements of banks.

These measures had some dampening impact on the housing demand, though overall absorbtion remained healthy. These also helped to keep specualtors away from the market, it said.

More pressure

“With limited bank credit and restriction on infusion of foreign debt into the sector, going forward, financing real estate projects may become more challenging especially for developers with limited development experience and management background,” E&Y said. This will lead to more pressure on the profit margin of the real estate developers, it added.