Home-buyers driving spurt in retail loan growth

Home-buyers seem to be coming back in strong numbers, going by the increase in the home loan portfolio of public sector banks.

The first quarter numbers reveal that there has been a significant increase in the number of home loans extended compared to the year-ago period.

State Bank of India (SBI) has recorded 15.6 per cent growth, with other banks reflecting a similar trend.

The growth is significant in loans up to ₹30 lakh. Data available with SBI show that this category accounted for 75 per cent of the total home loans.

What is driving this trend? A senior official of Union Bank of India told BusinessLine : “There has been muted growth in the housing segment in recent years but now people are coming forward to buy affordable houses.

“Price correction in the real estate sector, increasing rentals and tax sops could be driving this spurt in interest.”

The growth in loans has now scaled up from single-digit to double-digits. For example, growth in the housing business was 41 per cent in the June quarter, on a year-on-year basis, compared with 5 per cent in the previous year.

Similarly, many other banks, including SBI (15 per cent), Punjab National Bank (20 per cent), Allahabad Bank (26 per cent), Andhra Bank (22.8 per cent), and Corporation Bank (8 per cent) registered growth.

Good traction in demand is seen in Mumbai, Bangalore, Chennai and parts of Eastern India, said bankers.

According to CR Sasikumar, Chief General Manger of SBI, demand for home loans was generally on the rise except in Telangana and Andhra Pradesh.

“In Hyderabad, people are waiting for prices to come down while in Andhra Pradesh, speculation about the new capital has put off buyers. But outside these two States, the situation is different,” he said.

The home loan portfolio has now become a major driving force for the continued focus on retail lending for banks at a time when corporate credit offtake remains low.

In this scenario, the housing loan portfolio occupies a significant chunk of the total retail lending of many banks.

For example, it accounts for about 60 per cent and 39 per cent of the total retail credit deployment of Union Bank of India and Corporation Bank, respectively.

From a banker’s perspective, retail loans, in general, and home loans, in particular, are seen as ‘safer credit’ with relatively lower non-performing assets that are in the range of 2-2.5 per cent, compared with other loans.