Banks double down on home loan segment
Indian banks are jostling to sanction and disburse home loans, having tasted success on this front in a tough economy.
The aggregate home loan portfolio of banks grew 9.1% in the year till March 26 to ₹14.59 lakh crore. While this was lower than the 15.4% growth seen a year ago, it marks an improvement after the plunge in the first few months of the pandemic.
Senior bankers attributed the growth in home loans to low interest rates and the shift to remote working. As work-fromhome becomes the norm, people can buy houses far from expensive office centres. Banks are increasingly focusing on the segment, sensing the opportunity and realising the need for more secured loans on their books.
After the collapse of Dewan Housing Finance Corp. Ltd (DHFL), there has been a stronger movement of home loans towards banks, CS Setty, a managing director at State Bank of India (SBI), said. The central bank had referred DHFL to the insolvency tribunal in November 2019, following mounting stress at the mortgage lender. The Piramal group recently won a bid to take over the lender and is now awaiting regulatory clearances.
“So, it is a combination of banks willing to do more secured loans, and the underperformance of some of the major non-banking financial companies (NBFCs) has led to an increase in the portfolio of bank home loans. This asset class will definitely be pursued by everyone as they see value and security in it,” Setty said over the phone.
State Bank of India has a 35% share in home loans among all commercial banks. The lender, which has a home loan portfolio of ₹5 trillion, plans to double it in the next five years.
At private sector lender Axis Bank, home loan disbursements jumped 73% year-on-year
SENIOR BANKERS ATTRIBUTED THE GROWTH IN HOME LOANS TO LOW INTEREST RATES AND THE SHIFT TO REMOTE WORKING
(y-o-y) as on March 31, the sharpest disbursement growth within the secured segment. “Our home loan logins and disbursements for Q4FY21, touched highest ever quarterly numbers, driven by improved rigour and rhythm and reduced turnaround times as a result of project initiatives we are undertaking,” Amitabh Chaudhry, chief executive, Axis Bank told analysts on April 27.
Kotak Mahindra Bank, another privately held lender, saw a 13% growth in home loans and loans against property (LAP). The bank has reduced the relative size of its unsecured book to 5.8% of loan book in FY21 from 7.5% a year ago. The bank has also retained its home loan rate of 6.65% beyond the original deadline of March 31.
“We continued our strategy to focus on home loans. We ensure customers get access to home loans at the right price, which made home loan buying easier,” Shanti Ekambaram, group president of consumer banking at Kotak Mahindra Bank, told analysts on May 3.
Another reason why home loans are considered one of the safest assets in India is the emotional connect borrowers tend to have with their homes.
Setty of SBI explained that most home loan borrowers in India are first-time home buyers, wary of losing it on account of non-repayment.
“So, it is not only about the value of the security but also the value attached by the borrower to the security,” added Setty.
However, the raging second wave of the pandemic has hit India’s residential property market, with new home sales set to fall sharply this quarter as potential buyers defer plans and companies put off new launches. This has dampened a recovery of the sector seen till March supported by government sops in some states, lower borrowing costs.