ABSTRACT
This chapter reviews the various roles that banks play as part of the real estate lending process. Commercial banks have traditionally been sources of residential real estate construction lending. Residential construction lending aligns well with the expertise and structure of commercial banks. The chapter discusses how banks perceive that Basel capital standards have an impact on their cost of capital. When it comes to real estate lending, the word bank is often used colloquially: borrowers will speak of going to the bank for a loan. A large publicly-traded shopping centre real estate investment trust that went bankrupt during the global financial crisis illustrates the point. The company operated shopping malls that performed well and had sufficient cash flows to make mortgage payments. Investors in real estate face trade-offs when determining whether to obtain debt financing directly through banks, insurance companies or pension funds, or through real estate capital markets.
