SBI to Reassess Construction Finance Strategy

State Bank of India (SBI) Chairman C S Setty on Saturday said the country’s largest lender will reassess its policy on construction finance for residential real estate. However, he made it clear that accountability, transparency, and robust risk management would play a decisive role in determining interest rates for such loans.

Limited Exposure to Residential Projects

Currently, SBI has a negligible presence in residential construction finance. Setty noted that while the bank is cautious in this segment, it is gradually building exposure to commercial real estate, particularly office spaces. He explained that past experiences of aggressive lending and overleveraging in residential real estate have resulted in significant losses for lenders, making banks more cautious today.

Focus on Transparency and Risk Management

Setty underlined that transparency in project execution, sound project management practices, and effective risk controls are critical factors for lenders. According to him, developers who demonstrate stability and accountability will gain lenders’ confidence, enabling them to access construction finance at more affordable interest rates.

Conditions for Commercial Real Estate Lending

On commercial real estate financing, the SBI chairman said developers should secure at least 40–50 per cent commitment from potential tenants before seeking construction finance for office projects. This, he said, reduces occupancy risks and ensures financial viability. He also cautioned against situations where office buildings are constructed without sufficient tenant demand.

Interest Rates Linked to MCLR

Responding to queries on interest rate reductions for construction finance, Setty said lending rates are linked to the Marginal Cost of Funds Based Lending Rate (MCLR). Any revision in MCLR is aligned with changes in term deposit rates. Earlier this month, SBI revised both its MCLR and fixed deposit rates for select tenures.

Advice to NBFCs in Housing Finance

Setty also advised non-banking financial companies operating in the housing finance segment to lower their operational costs. He said cost efficiencies would allow NBFCs to offer housing loans at more competitive rates, benefiting borrowers and supporting sustainable sector growth.

SBI Share Price

On December 22, 2025, SBI share price (NSE: SBIN) opened at ₹981.10, touching the day’s low at ₹972.55, as of 12:19 PM on the NSE.

Also Read: SBI Launches Yono 2.0; Plans to Expand Digital Support Staff!

Conclusion

SBI’s cautious yet constructive approach signals a potential shift in construction finance, with greater emphasis on transparency, accountability, and demand-backed projects. The reassessment could support healthier growth in real estate while safeguarding lenders from past risks.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a private recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.