ABSTRACT
This chapter examines the impact of real estate lending on the risk assumed by South Asian banks. It considers both a measure of banks’ risk of default and a measure of the risk of losses on their lending portfolio. The chapter provides a five-year time horizon and shows that banks specializing in real estate lending are less risky and the advantages are clearer when they adopt a more aggressive lending policy. It presents a literature review of the financial stability issues and main differences between South Asian and other real estate markets. All of the control variables show a significant standard deviation due to the significant differences in the sample related for banks’ specific features. The sample considers seven countries in South Asia—Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri Lanka—and 533 banks with mortgage exposure data available from the balance sheet.
