Affordable housing is showing signs of rate-induced slowdown, according to State Bank of India’s economic research department’s (ERD) report Ecowrap.
The ERD estimates, on an average, the proportion of home loans up to ₹30 lakhs in total loans disbursed has declined to 45 per cent during January-February 2023 from around 60 per cent of disbursals in June 2022 quarter.
Moreover, the share of home loans above ₹50 lakh has increased from 15 per cent to about 25 per cent of the fresh disbursals during this fiscal.
“This indicates that the demand for housing loans by people at the lower end of the strata, who take loans for affordable housing sector, has been noticeably hit,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.
The ERD noted that with the rise of 250 basis points in repo rate from May 2022, the incremental housing loans of All Scheduled Commercial Banks have increased by over ₹1.8 lakh crore in April 2022-January 2023 compared to ₹1.4 lakh crore during the same period last year.
Ghosh observed that the rapid increase in EBLR (External Benchmark-linked Lending Rate, which is predominantly linked to repo rate) has resulted in banks either increasing the loan tenure or increasing EMI (Equated Monthly Instalment) or both depending on the age of the borrower, original tenure of the loan as also the residual tenure of the loan.
As per the ERD analysis, of around 55 lakh EBLR-linked home loan accounts, about 47 lakh customers’ ₹8-lakh crore outstanding witnessed increase in tenure, EMI or both.
MSME sector resilence
The report noted that MSMEs so far, have shown remarkable resilience in financial health even after the policy rate has increased by 250 bps since April 2022.
Around more than 2,200 small entities, in listed space, managed to maintain interest coverage ratio, in aggregate, of near 3 in recent quarters (Q3FY2023) as well.
However, around 381 companies have reported interest coverage ratio of less than one within the same universe.