The Hindu Business Line : Home loans: Housing finance cos see growth, banks slowdown

Mumbai, May 2 While housing finance companies have registered strong growth in home loan disbursals, banks are seeing a slowdown in this segment. Growth in the housing loan industry has slowed down from 25 per cent in 2006-07 to 12 per cent in 2007-08, according to RBI’s report ‘Macroeconomic and Monetary Developments 2007-08’.

Analysts attribute this fall to the banks’ going slow on retail loans due to rising non-performing assets and problems in recovery. However, housing finance majors have registered strong growth in business.

“Tax concessions are a big incentive for borrowers when they repay their loans. So, interest rate increases have not affected the demand for home loans. Besides, incomes have also gone up substantially which has helped borrowers to cope with the rising EMIs,” said a senior official at a leading housing finance company.

Housing Development Finance Corporation Ltd’s loan disbursements in 2007-08 were 26 per cent higher at Rs 32,875 crore; and loan approvals up 28 per cent at Rs 42,520 crore. Loan approvals and disbursements grew at 30 per cent and 27 per cent respectively in 2006-07.

Mr Conrad D’Souza, Senior General Manager Treasury, HDFC, said the average ticket size of loans increased in 2007-08 to Rs 14 lakh, against Rs 10.5-11 lakh the previous year, and that the housing major had seen no drop in the number of loan applicants.

LIC Housing Finance saw a 41 per cent increase in sanctioned loans at Rs 8,618 crore and a 38 per cent jump in disbursed loans at Rs 7,071 crore. In 2006-07, sanctioned loans had grown by 18.6 per cent while disbursed loans had risen by just 4.67 per cent. The housing finance major attributes its strong growth to ramped up marketing efforts.

The story has, however, not been the same for banks.

Interest impact

At a meeting to announce ICICI Bank’s full year results, Mr V. Vaidyanathan, Executive Director, ICICI Bank, talking about the slowdown in the home loan segment, said, “The interest rate environment has stayed high. That itself has moderated credit to the sector.” In fact, the bank sold about Rs 14,000 crore in retail loans last year. Bank officials would not say how much of this consisted of home loans but said they would be “a substantial chunk” of retail loans.

SBI saw a growth of 18.7 per cent in home loans for the year 2007-8, which is almost flat, from the previous year (18 per cent growth).

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