The year 2011 was everything that 2009 and 2010 were not, well at least for the home loan segment. While the latter years saw banks offering teaser home loan rates to ward off the recessionary doom of 2008-09, 2011 saw the RBI resorting to rate correction. Thus home loan rates saw an almost 200-300 basis points upward revision in rates.
However, the three percentage point hike in the home loan rates did not impact the home loan uptake much, bankers say.
“Most banks have not applied the normal spread mechanism on the retail loans. We are keeping the retail rates attractive so that customers are not unduly burdened,” Mr M. Narendra, Chairman and Managing Director, Indian Overseas Bank, told Business Line.
In cities such as Bangalore and Pune, property rates have not gone up significantly this year, explained Ms Subhalakshmi Panse, Executive Director, Vijaya Bank.
“The rates are in tandem with salary hikes in Bangalore and Pune, because of the predominant IT crowd in these cities,” she said. In these two cities, there has not been much of a negative growth in the real estate market too, she added.
According to her, the worst affected was Mumbai, because property rates have gone up. In Kolkata and Chennai, home loan off-take is stagnant.
“However, the off-take in tier-II and tier-III cities are good, as the property rates in these locations are still within the reach of the middle-class segment, and the rates are not higher as in the metros,” said Ms Panse.
Mr Uday Sareen, Country Head – Retail Banking, ING Vysya Bank, added that the moderation in the home loan segment is driven by tier-I cities, while tier-II and tier-III cities are making up by way of actual disbursals.
Recession impact
He pointed out that the reduced volume of home loan uptake in tier-I cities was more due to decision postponement by prospective buyers. “However, increased urbanisation, favourable age demographics at an overall industry level, and increase in the average loan ticket size will continue to drive the credit offtake in the coming years,” he added.
He pointed out that with better age demographics, “there is a higher propensity to borrow”, and that younger people are not wary of taking a loan. According to him, the average ticket size has increased 7-8 per cent overall.
Explaining the changes in the industry since the recession three years ago, he said that today unsecured products in the industry's product mix have down to 40 per cent as against two-thirds of the product mix then.
“There is a clear change in product mix in retail lending now, which is driven by the learning from the past experience,” he said. Improved quality of data available with the credit bureau has also been a game changer, he added.
Sourcing
Another change is the way in which banks source their home loans. As against sourcing of home loans through direct selling agents (DSAs), which was the practice three years ago, home loans are “increasingly sourced by employees and collections are also done in-house,” he said.
Thus, sourcing costs have also come down, and because of these in-house functions, asset quality continues to be better, said Mr Sareen.
Melas
This perhaps explains why a public sector bank such as Vijaya Bank has taken to home loan melas in a big way. Ms Panse pointed out that the bank has held over 120 melas across the country to increase its home loan portfolio.
These marketing activities gain significance, as the bank had a near flat to negative growth in this portfolio in the past two quarters. However, despite de-growth in the portfolio, she said that the repayment by existing borrowers is quite regular.
The bank has, on its part, increased its marketing staff strength, and all these efforts have helped it witness an upsurge in the portfolio during the third quarter of this fiscal.
Vijaya Bank, like most other banks, has not touched its housing loan rates. In the fourth quarter too, Ms Panse said that the bank would continue with the same rate and efforts.
Mr Sareen felt that the shortage in housing units in the country would continue to be a big driver for the real estate market, and, hence, requirement for finance.
Bankers are hopeful that the RBI would not hike its rates again in the immediate future, as it had indicated on a rate hike pause.
“As against sourcing of home loans through direct selling agents (DSAs), which was the practice three years ago, home loans are “increasingly sourced by employees and collections are also done in-house.”