Rising interest rates will push up the equated monthly instalments (EMIs) of home loan borrowers by about Rs 6,000 crore annually, said a report by Crisil Research.
Further, higher EMIs and a slowdown in economic growth will result in an increase in non-performing assets of lenders.
Floating interest rate for home loan borrowers has increased by around 250 basis points (bps) since April 2010 due to the continuous increase in key policy rates. This would correspond to an average increase of 15 per cent in EMIs.
According to the report, EMIs have increased for 40 per cent of the existing floating rate customers, while the remaining customers have chosen to increase their tenures or do a part payment. Customers paying higher EMIs face an estimated additional annual burden of around Rs 3,500 crore.
Banks and housing finance companies are likely to see a rise in NPAs due to the steep rise in the interest outgo for borrowers coupled with the economic slowdown.
Mr Prasad Koparkar, Head – Industry and Customised Research, Crisil Research, said, “The NPA levels are expected to go up by around 30 bps to reach 1.9 per cent by March 2013. However, losses on this account are expected to increase only marginally.”
Teaser loans
Higher interest rates have not yet affected customers who have opted for teaser loan schemes, as the rates are fixed for the initial two to three years.
According to Crisil, 25 per cent of the housing loan portfolio of Rs 5,10,000 crore as of March 2011 comprises teaser loans. Once interest rates get reset to prevailing market rates (from April 2012), the additional EMI burden would be Rs 2,000-2,500 crore annually.
The profitability for lenders would increase as the teaser loan portfolio gets linked to the prevailing higher market rates starting April 2012, the report added.
Mr Ajay Srinivasan, Head - Industry Research, Crisil Research said, “Due to higher yields, we expect the net profit margin of housing finance players to increase by around 30 bps in FY 2012-13.”