How does the alleged nexus between builders and banks affect the real estate sector and public trust in financial institutions?

The alleged nexus between builders and banks refers to improper or illegal cooperation between real estate developers and financial institutions. This often involves banks giving undue financial favors to builders, overlooking due diligence, or facilitating diversion of funds. Such practices can have wide-ranging effects on the real estate sector and public trust in banking.

• Distortion of Real Estate Market: Builders may get easy access to large loans, sometimes without proper checks. This can lead to oversupply, inflated property prices, and creation of unsold inventory.
• Project Delays and Stalled Projects: When funds are misused or diverted, construction projects may get delayed or remain incomplete, causing losses to homebuyers and investors.
• Rise in Non-Performing Assets (NPAs): Loans given without proper assessment often turn into bad loans, increasing NPAs in banks and affecting their financial health.
• Loss of Public Trust in Banks: When people see banks favoring big builders at the cost of ordinary depositors and borrowers, their confidence in the banking system is shaken.
• Corruption and Lack of Accountability: The nexus encourages corruption, as officials may accept bribes or favors in exchange for sanctioning loans. This erodes transparency and accountability in both sectors.
• Negative Impact on Homebuyers: Ordinary people who invest their savings in real estate may suffer financial losses if projects are delayed or abandoned due to mismanagement of funds.
• Regulatory Challenges: Such practices make it difficult for regulators to ensure fair play and protect consumer interests in both banking and real estate sectors.