The Hindu Business Line : Banks staring at fewer takers for home loans

The banking system is staring at a drop in the growth rate of home loans from over 30 per cent to 25 per cent in certain markets owing to high real estate prices, admitted Mr Rajiv Sabharwal, Senior General Manager, Head- Retail Assets, ICICI Bank, on the sidelines of a press conference.

Pricey home loans have been only partly responsible for the slowdown in certain markets, the official added. Home loans form around 50 per cent of ICICI Bank's total retail assets portfolio.

"There has been a particular slowdown in metro markets due to a mix of steep real estate prices and climbing interest rates on home loans," said a senior bank official from a public sector bank. Markets such as Mumbai, Delhi and Pune have seen a robust rise in real estate prices. "Semi-urban and other urban markets, however, have not faced any slowdown," he added.

An HDFC spokesperson said the housing finance company did not see any slip in offtake of home loans in the last quarter.

HDFC, SBI and ICICI Bank hiked their home loan rates recently.

Some bankers think real estate prices may not go forward any more. If prices hold steady, they do not foresee a drop in offtake of home loans.

"Based on historical data, real estate prices are not expected to show a reversal but may stagnate," said Mr Subir V. Gokarn, Executive Director and Chief Economist, Crisil.

According to bank officials and experts, lower real estate prices in non-metros could deflect demand from metros. According to an expert, land developers have turned cautious and are not releasing properties hoping for the markets to stabilise.

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