The CBI has arrested eight people for giving loans to builders after taking bribes. They include the CEO of LIC Housing Finance, Ramachandran Nair, General Manager of Bank of India, RN Tayal, and deputy General Manager of Punjab National Bank, Venkoba Gujjal. Seems that builders are unable to sell properties because of the stratospheric prices of property in India but are unwilling to reduce prices to clear their inventory. They have been solving the resultant drop in cash flow by borrowing from banks to run their day to day business. All banks have been quick to clarify that there is no risk to themselves because the money has been lent against property which makes the loans completely safe. However, that is assuming that property prices stay at the same levels or rise further. Indian banks have a total exposure of $ 22 billion or Rs. 1 trillion in loans to real estate companies. Their confidence is based on the fact that at least half the price of a property is paid in cash or black money so people will not default on their housing loans whatever the hardship for fear of losing so much money but if builders are unable to clear their stocks they will inevitably run out of cash. If banks try to foreclose on their loans and sell off so many properties prices will crash.This happened in the US, in Ireland and in Spain and it would be stupid to think that it could not happen here. They are dishing out valium to investors so that they do not dump real estate and banking stocks and foreign investors do not panic. Meanwhile how did such high profile sarkari fellows get arrested? Did they not pay off politicians and civil servants properly? Silly boys.