Nov 18
Abhishek Anand
A staggering Rs 10,00,000 crore is required to meet the financing needs of the
country’s housing requirements. So says
S Sridhar, chairman and managing director, National Housing Bank. With a burgeoning middle class and soaring aspirations, this figure will only grow.
There is a huge business potential waiting to be tapped as the housing sector slowly comes out of the slump and demand builds up. In fact, Sridhar says that the country’s banking sector does not have the money to fund the estimated needs of the sector.
Lenders are falling over each other to corner a piece of the pie. The country’s biggest bank, State Bank of India (SBI) started the rate war earlier this year by offering lowest home loan rates during the slowdown. It has kept the war going by extending the SBI Easy Home Loan Scheme. Under the scheme, SBI is providing home loans at 8 per cent for the first year and 8.5 per cent for second and the third year, till the end of the present financial year.
Not to be left behind, Delhi-based Punjab National Bank (PNB), the second-largest PSU lender, too has extended its Festival Home Loan Bonanza Scheme by two months till the end of December. PNB is offering housing loans of up to Rs 30 lakh at 8.50 per cent (fixed) for the first three years and 2 per cent to 2.50 per cent below benchmark prime lending rates in subsequent years of loan tenure under floating option. In addition, PNB has also reduced the amount of money that a home buyer has to pay upfront to 15 per cent on housing loans of up to Rs 20 lakh.
It’s not just the public sector banks that are keen to grow their home loan portfolio. Private lenders are also logging in. Bank of Rajasthan recently lowered interest rates on home loan to 7.5 per cent, the lowest going rate in the segment.
According to the new revised interest rate regime of the Apna Ghar Scheme, the bank would be charging 7.5 per cent for the first year on loans up to Rs 30 lakh. Interest rate for the second and third year is 8.50 per cent, and 8.75 per cent or 0.25 per cent below the retail prime lending rates from the fourth year onwards.
For housing loans above Rs 30 lakh, 8 per cent interest would be charged for the first year, 9 per cent for the second and third year and 9.75 per cent from the fourth year onwards, for all maturity periods. Bank of Rajasthan has a total home loan outstanding portfolio of Rs 500 crore.
The government too has chipped in to stir the home loan market. Not only have efforts been made to encourage builders to come up with affordable housing, the government recently came out with a scheme that provides interest subsidy on home loans up to Rs 20 lakh.
The government is providing an interest subsidy of 1 per cent on housing loans of up to Rs 10 lakh, provided the cost of the house does not exceed Rs 20 lakh. The additional subvention means that home loans are virtually at the lowest level ever.
As a result of all these efforts, demand for home loans is showing signs of improvement. Public sector banks have reported 17.27 per cent year-on-year growth in the home loan segment. This is far better than overall credit growth of 11.2 per cent reported by scheduled commercial banks.
SBI, which has been very aggressive in the home loan market, has registered a year-on-year growth of 23 per cent. Its total home loan outstanding portfolio stands at Rs 62,338 crore.
The largest housing finance company, HDFC’s loan approvals during the six-month period ending September 30 amounted to Rs 28,418 crore compared with Rs 24,180 crore in the corresponding period previous year, a growth of 18 per cent.
Loan disbursements during the six-month period ended September 30 stood at Rs 22,342 crore, up 26 per cent from the corresponding period previous year. Some other banks such as Oriental Bank of Commerce (OBC) too have witnessed a decent growth in home loan portfolio.
“We have clocked a year-on-year growth of 28 per cent in our housing loan portfolio during the quarter ended September 2009 and early signals suggest the third quarter would be better than the second quarter,” said H Ratnakara Hedge, executive director of OBC.
But lowering of interest rates is not the only way of enhancing home loan portfolio. Banks such as IDBI Bank have adopted new ways. The Mumbai-based bank, which has turned out to be the fourth largest home loan distributor in the present financial year so far, is utilising property expos as a tool to attract borrowers.
“We would be organising 17 property expos in all and hope to sanction close to Rs 2,500 crore of home loans from these venues alone by the middle of December,” said C S Jain, head of personal banking at IDBI Bank.
However, borrowers may not be as eager as the lenders. The offtake of housing loans would depend on the movement of property prices. Property prices in many parts of the country have been hardening, which may create uncertainty among buyers. According to Residex, an index of property prices across 15 cities prepared by National Housing Bank, a wholly-owned subsidiary of the Reserve Bank of India, property prices have firmed up in at least nine of those 15 cities.
According to the index, prices of residential properties in Mumbai have increased by 5.98 per cent between December 2008 and June 2009, and by 26 per cent and 13 per cent in Chennai and Kolkata respectively. Prices increased by 27 per cent in Ahmedabad and a whopping 36 per cent in Faridabad in Delhi's neighbourhood. Other major cities that witnessed price rise are Lucknow, Pune, Surat and Patna.
The lenders are banking on the last of three basic human needs of roti, kapada aur makaan (food, cloth and housing) to keep the cash registers ringing.
S Sridhar, chairman and managing director, National Housing Bank. With a burgeoning middle class and soaring aspirations, this figure will only grow.
There is a huge business potential waiting to be tapped as the housing sector slowly comes out of the slump and demand builds up. In fact, Sridhar says that the country’s banking sector does not have the money to fund the estimated needs of the sector.
Lenders are falling over each other to corner a piece of the pie. The country’s biggest bank, State Bank of India (SBI) started the rate war earlier this year by offering lowest home loan rates during the slowdown. It has kept the war going by extending the SBI Easy Home Loan Scheme. Under the scheme, SBI is providing home loans at 8 per cent for the first year and 8.5 per cent for second and the third year, till the end of the present financial year.
Not to be left behind, Delhi-based Punjab National Bank (PNB), the second-largest PSU lender, too has extended its Festival Home Loan Bonanza Scheme by two months till the end of December. PNB is offering housing loans of up to Rs 30 lakh at 8.50 per cent (fixed) for the first three years and 2 per cent to 2.50 per cent below benchmark prime lending rates in subsequent years of loan tenure under floating option. In addition, PNB has also reduced the amount of money that a home buyer has to pay upfront to 15 per cent on housing loans of up to Rs 20 lakh.
It’s not just the public sector banks that are keen to grow their home loan portfolio. Private lenders are also logging in. Bank of Rajasthan recently lowered interest rates on home loan to 7.5 per cent, the lowest going rate in the segment.
According to the new revised interest rate regime of the Apna Ghar Scheme, the bank would be charging 7.5 per cent for the first year on loans up to Rs 30 lakh. Interest rate for the second and third year is 8.50 per cent, and 8.75 per cent or 0.25 per cent below the retail prime lending rates from the fourth year onwards.
For housing loans above Rs 30 lakh, 8 per cent interest would be charged for the first year, 9 per cent for the second and third year and 9.75 per cent from the fourth year onwards, for all maturity periods. Bank of Rajasthan has a total home loan outstanding portfolio of Rs 500 crore.
The government too has chipped in to stir the home loan market. Not only have efforts been made to encourage builders to come up with affordable housing, the government recently came out with a scheme that provides interest subsidy on home loans up to Rs 20 lakh.
The government is providing an interest subsidy of 1 per cent on housing loans of up to Rs 10 lakh, provided the cost of the house does not exceed Rs 20 lakh. The additional subvention means that home loans are virtually at the lowest level ever.
As a result of all these efforts, demand for home loans is showing signs of improvement. Public sector banks have reported 17.27 per cent year-on-year growth in the home loan segment. This is far better than overall credit growth of 11.2 per cent reported by scheduled commercial banks.
SBI, which has been very aggressive in the home loan market, has registered a year-on-year growth of 23 per cent. Its total home loan outstanding portfolio stands at Rs 62,338 crore.
The largest housing finance company, HDFC’s loan approvals during the six-month period ending September 30 amounted to Rs 28,418 crore compared with Rs 24,180 crore in the corresponding period previous year, a growth of 18 per cent.
Loan disbursements during the six-month period ended September 30 stood at Rs 22,342 crore, up 26 per cent from the corresponding period previous year. Some other banks such as Oriental Bank of Commerce (OBC) too have witnessed a decent growth in home loan portfolio.
“We have clocked a year-on-year growth of 28 per cent in our housing loan portfolio during the quarter ended September 2009 and early signals suggest the third quarter would be better than the second quarter,” said H Ratnakara Hedge, executive director of OBC.
But lowering of interest rates is not the only way of enhancing home loan portfolio. Banks such as IDBI Bank have adopted new ways. The Mumbai-based bank, which has turned out to be the fourth largest home loan distributor in the present financial year so far, is utilising property expos as a tool to attract borrowers.
“We would be organising 17 property expos in all and hope to sanction close to Rs 2,500 crore of home loans from these venues alone by the middle of December,” said C S Jain, head of personal banking at IDBI Bank.
However, borrowers may not be as eager as the lenders. The offtake of housing loans would depend on the movement of property prices. Property prices in many parts of the country have been hardening, which may create uncertainty among buyers. According to Residex, an index of property prices across 15 cities prepared by National Housing Bank, a wholly-owned subsidiary of the Reserve Bank of India, property prices have firmed up in at least nine of those 15 cities.
According to the index, prices of residential properties in Mumbai have increased by 5.98 per cent between December 2008 and June 2009, and by 26 per cent and 13 per cent in Chennai and Kolkata respectively. Prices increased by 27 per cent in Ahmedabad and a whopping 36 per cent in Faridabad in Delhi's neighbourhood. Other major cities that witnessed price rise are Lucknow, Pune, Surat and Patna.
The lenders are banking on the last of three basic human needs of roti, kapada aur makaan (food, cloth and housing) to keep the cash registers ringing.
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