Banks see home loan sales reviving

[sajiv]

Bangalore: Bankers believe their strained home loan portfolios will see relief in the coming quarters, with interest rate cuts coming into force."We expect our home loan offtake to increase by 22 per cent y-o-y next quarter with the fall in interest rates," said B.R. Pai, General Manager, Syndicate Bank. The bank, which has a Rs 6,500-crore home loan portfolio, saw a slower 18 per cent y-o-y growth in home loans disbursed last quarter, as compared to a 30 per cent growth for the same quarter last year.

RBI gives banks long rope on home loans portfolio
Home loans will become cheaper as most public sector banks, including State Bank of India, Canara Bank and Syndicate Bank among others, have cut their benchmark prime lending rates (BPLR) by 75 basis points. Bankers are betting on buyers who had earlier postponed their purchases owing to a high interest rates to come on board.

Home loan growth slowing
Kumar Gera, chairman of the Confederation of Real Estate Developers' Associations of India (Credai), said there is a pent up demand for residential property that will lead to a demand uptake once liquidity returns.

With property prices showing correction in recent times, bankers like C Abraham, General Manager of Union Bank, believe that more genuine buyers will come into the fold. This will see an uptake in home loan disbursals."Even Union Bank has been given a mandate by the board to make property purchases for housing our staff and for long term investment purposes.

Valuations are down considerably from ridiculously high levels," he said. Union Bank has cut home loan rates by 50 basis points to 10.75 per cent. Vijaya Bank, which has seen a slower growth in its home loan portfolio, sees positive sentiment returning to the markets following RBI's various actions to infuse liquidity. Albert Tauro, CMD, told DNA Money: "Demand waned for our home loans in the last few months. This is the right booster that we were looking for our home loan segment," he said.

The bank has a Rs 4,000 crore home loan portfolio that grew by just 7 per cent last quarter. A.C. Mahajan, CMD, Canara Bank agrees that the home loan portfolio of banks, which have taken a beating will recover with demand coming in, from well-salaried employees who are risk averse. However, a high-ranking SBI official on condition of anonymity said that offtake of home loans in SBI may not see a huge rise.

SBI will still exercise caution under the tough economic conditions that are persisting, he said. "Loan applications of people from sectors like IT which are seeing layoffs are being more carefully scrutinised to avoid defaults," the official said.