Bhopal, Sep 17 (PTI) With an eye on the coming festive season, leading public sector bank State Bank of India will provide home loans to its customers at concessional interest rates. SBI Chief General Manager (CGM) Umesh Kumar Pandey informed that this drive to provide home loans at concessional interest rates will be completed in two phases, an official release said on Thursday.
The first phase will be operated from September 1 to October 31, while the second phase will be operational from November 1 to December 31, it said.
Customers wishing to take a home loan during this period can get it with a minimum floor rate of interest of 6.70 per cent, and they will not have to pay any processing fee.
In this campaign, customers will also get many other benefits. The interest rates are linked with the CIBIL score.
No distinction has been made between the interest rates of salaried and non-salaried customers and a genuine effort has been made to pass on the benefit of lowest interest rates to all, it said.
Pandey also informed that the main objective of this campaign of SBI is to help more and more people to get their own home at low interest rates and without paying processing fee, making the home loan business simpler and more attractive, it added.
Home loans help people become property owners, and have ownership over secured assets. That is why it is so important for us to know where we can avail the loan from.
Tenure for home loans usually range from 15 years to 30 years, and is one of the most affordable loans available.
The cost effectiveness of a home loan depends on the bank you choose. Following are some top banks offering affordable home loans.
(Source: Official Websites- Kotak Mahindra Bank, ICICI Bank, Union Bank of India, State Bank of India, Axis Bank, Canara Bank BankBazaar.com- Bank of Baroda )
Even as lenders jostle for home loan pie, the assets under management of the segment across banks and non-banks are likely to grow by 15% over the next three to five years, according to ICICI Securities.
This would be on the back of the rise in disbursements and improved affordability.
“Factors such as low interest rates, stamp duty cut, benign real estate prices, etc. have improved affordability to own a house. ‘Work from home’ has kindled incremental housing demand. Construction too was not adversely impacted during the second wave,” the brokerage said.
Home loan growth fell to 8% over the previous three financial years as compared to 17-18% earlier while disbursements fell to Rs 5.3-5.5 lakh crore due to the pandemic. However, now risen to a run-rate of Rs 7-8 lakh crore.
Segment-wise
The Rs 2.5-7.5 lakh ticket size, or prime segment, has grown in the mid-teens, while the affordable housing segment has grown in mid-single digits over the past two to three years.
The extent of loans disbursed in the prime segment has also been significant, as per the brokerage.
Among housing financiers, the likes of Housing Development Finance Corp and LIC Housing Finance are returning to double digits for retail loans. In the case of banks, the home loan portfolio has stayed put since March. “Neither did they decline in the initial two months of this fiscal, nor was the momentum build-up witnessed in June-July. Year-on-year growth, thereby, sustained at around 9%. Now banks are fiercely competing with cut-throat pricing,” ICICI Securities said.
The Kotak offer
The competition among banks in home loan space is growing.
Kotak Mahindra Bank is offering home loans at a lower rate of 6.50 per cent is a festive period offer available only for two months till November 8, and the lowest offering is for those having highest credit scores coming from the salaried segment.
In the past, its rivals which include HDFC and SBI, have responded to rate cuts by slashing their own offering. The rate cut comes at a time when demand for home loans is falling in the country and may spark similar offers from rivals.
Large banks like the State Bank of India already offer home loans at as low as 6.65 per cent and 6.75 per cent, respectively, while the interest rates for HFCs is between 7.45 per cent and 10 per cent.
Nirmal Bang Institutional Equities said in a note, “The demand momentum seen in housing loans last year has tapered off and organic growth for the housing finance industry has been softening,” the brokerage house said. The organic growth in the home loan segment for large banks has been slowing over the last 45-50 days.
Kotak Mahindra Bank has cut its interest rate on home loans to 6.50% from 6.65% per annum, starting from Friday till November 8.
The bank is offering these rates in view of the upcoming festive period. These rates will be prevalent for both fresh home loans and balance transfers, and will be available across all loans amounts and is linked to a borrower’s credit profile.
The bank’s home loan rates are linked to an external benchmark, that is the Reserve Bank of India’s policy repo rate of 4%
As families get ready to welcome Ganesha into their homes, we are delighted to make it even easier to buy the home of one’s dream. Home Loans now at 6.50%. Wish everyone a happy festive season.
With Kotak Digi Home Loans, home loan applicants can apply and receive an instant in-principle sanction letter, loan amount eligibility, tenure of the loan, interest rate and EMI in an end-to-end contactless process. Following are the features of the home loans: > Starting at 6.50% per annum, on fresh home loans and balance transfer loans > Attractive rates for both salaried and self-employed customer segments > Instant in-principle sanction with Kotak Digi Home LoansConsumers can also apply through Kotak’s bank branches across India. The bank’s home loans are available across over 100 cities and towns in India. Existing Kotak customers can also apply through the Kotak mobile banking app or net banking.
India Post Payments Bank (IPPB) and LIC Housing Finance Ltd (LICHFL) on Tuesday announced a strategic partnership for providing home loans to over 4.5 crore customers of IPPB.
As part of the Memorandum of Understanding (MoU), all home loans’ credit underwriting, processing, and disbursement will be handled by LICHFL, with IPPB responsible for sourcing.
IPPB, which has an extensive network of 650 branches and more than 1.36 lakh banking access points, will make LICHFL’s home loan products accessible to its customer’s pan-India, according to a joint statement.
IPPB’s on-ground workforce of nearly 2 lakh postal employees (Postmen and Gramin Dak Sevaks), equipped with micro ATMs and biometric devices and offering Doorstep Banking Service, will play a significant role in providing LICHFL’s housing loans, it added.
IPPB is currently distributing various general and life insurance products through partnerships with leading insurance companies, and credit products are a natural extension for the customers at the last mile, the statement said.
J Venkatramu, MD & CEO, IPPB, said, “Easy access to credit for buying a house is an important prerequisite towards achieving inclusive growth.
“…The partnership with LICHFL is a significant tie-up in IPPB’s journey to become one of the largest platforms for availing credit products by our customers for meeting various needs…”
Y Viswanatha Gowd, MD & CEO, LICHFL, said this strategic MoU with IPPB will help LICHFL to further deepen its market penetration.
“…We see this strategic partnership as a significant step that will help our long-term business growth and improve our market share.
“This is in line with the Company’s objective to increase business contribution from Tier 2 markets and beyond,”Gowd said.
Mortgage Guarantee backed home loans will broaden Clix HFL’s coverage of home loan products and customer segments enabling more business while also supporting the flagship mission of Government of India of “Housing for All by 2022”.
“With the rising demand in the affordable housing segment, this strategic partnership would support to fulfill “Early Home Ownership” dreams of the first-time homebuyers and enable Clix to enhance its penetration in the Low & Mid-market segment besides mitigating the credit risk in case of default,” said Gaurav Pawra, CEO, Clix Housing Finance.
The program between IMGC and Clix HF has been designed in a manner to address the needs of a wide range of customers through varied products like ‘Term Extension Product for Salaried Customers’ and Documented Income Product for Self Employed Customers. A regular home loan is typically given till retirement age however with this product, the tenure is extended to additional 10 to 15 years depending upon the borrower profile.
IMGC is providing various surrogate products for self-employed customers like Banking Product, Low LTV Product, Assessed Income Product to cater to the needs of varied customers.
Mahesh Misra, CEO, IMGC said,” We are very pleased to partner and work with Clix in strategically identified segments and are confident that this will be a hugely successful partnership in the months to come. We have a defined execution roadmap with emphasis on driving financial inclusion through this partnership with Clix”.
Historically, a home loan is considered the safest variety of credit because there is a security attached to it and most borrowers want to avoid losing their homes.
Demand and possession notices for apartments bought using home loans have been on the rise as delinquencies climb in the segment. Over the last few weeks, banks and non-banking financial companies (NBFCs) alike have sharply increased the volume of homes they repossess and put up for auction.
The notices have been put out by lenders across the public and private sectors, with institutions like IDBI Bank, Union Bank of India, Bandhan Bank, IIFL Home Finance, Tata Capital Housing Finance, Muthoot Housing Finance and Manappuram Home Finance, among others. The recovery amounts fall in the wide range of just under Rs 1 lakh and up to Rs 95 lakh.
“It is true that banks across the industry have become active about making recoveries. There are three processes they are employing – aggressive collections, resolution of the accounts wherever possible, and finally liquidation of whatever stock they have,” said a senior executive with a mid-sized private bank. The trend of recoveries through auctions are likely to continue into the third and fourth quarters of the current year, he added.
A similar trend of auction notices had been observed in the January-March quarter with respect to gold loans. Thereafter, most lenders with a sizeable gold loan portfolio reported a deterioration in asset quality in that segment. Bankers said that the notices work more as a wake-up call for the borrower than as an actual announcement of auctions.
Of course, there are stages to making recoveries through the auction route. The lender first issues a demand notice under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) Act, seeking repayment of outstanding dues within a stipulated period. If the demand is not met, it then puts out a possession notice and then finally a sale notice. All three kinds of notices now cover entire pages of newspapers.
Historically, a home loan is considered the safest variety of credit because there is a security attached to it and most borrowers want to avoid losing their homes. However, the second wave of the pandemic has dealt a huge blow to some borrowers, causing home loan slippages to rise.
Bankers said that the pain is severest in the self-employed category because their income streams have been affected due to repeated lockdowns and mobility restrictions. Unlike in the first half of FY21, there is no moratorium in the current year and that has caused higher delinquencies. State Bank of India’s (SBI’s) gross non performing asset (NPA) ratio in the home loan segment stood at 1.39% as on June 30, though it improved to 1.14% thereafter.
SBI chairman Dinesh Khara said after the bank’s Q1 results that almost 50% of the bank’s home loan book is to the non-salaried class. “Many of the SME borrowers also would be the ones to avail home loans. I think the essential stress seen in this book is on account of disruption in cash flows for the SMEs,” Khara said.
Analysts expect collection trends to improve in the days ahead. In a recent note, Emkay Global Financial Services said that banks expect some NPAs from the inflated special mention account (SMA) pool to spill over into Q2, while the restructured pool too should inch up. “Collection activity may return to the pre-Covid level in Q3, subject to no severe Covid third wave. Within retail, recovery rates should improve in secured mortgages and gold loans as stress formation in those segments was higher than expected due to impaired mobility, which has normalised now,” Emkay said.
Housing loan borrowers are making the most of the current record-low interest rate regime as indicated by a 42% on-year surge in demand for Balance Transfers (BT) and 26% rise for home loans in the first half of 2021, showed a Magicbricks Home Loans Consumer Study.
The demand for Loan Against Property (LAP) during this period has also witnessed a 20% rise. The soaring demand is largely attributed to the Reserve Bank of India’s decision to keep the repo rate unchanged at a constant 4%.
This has allowed many banks to offer home loans at interest rates lower than 7%, which has also been a key driver in augmenting the demand for home buying.
Magicbricks Home Loans Consumer Study also reveals that the most frequently searched home loan amount across tier-1 cities during this period was Rs 36 lakh, while that for BT and LAP were Rs 26 lakh and Rs 32 lakh, respectively. For tier-2 cities, it was Rs 26 lakh for home loans, Rs 23 lakh for LAP and Rs 18 lakh for BT.
“The rising demand for home loans is in line with the increasing demand for residential real estate across key markets of India. Several initiatives by the government, such as keeping the repo rate constant and reduced stamp duty rates, are steps in the right direction. These measures have been instrumental in boosting the overall consumer sentiment, making almost 50% of the borrowers opt for tenures less than 15 years,” said Sudhir Pai, CEO, Magicbricks.
With factors like low interest rates, stable prices, and attractive payment plans, he hopes the pent-up demand would soon translate into sales.”
With Work from Home (WFH) becoming a norm, home buyers are now looking to buy or upgrade to large configuration houses, and thus the demand is mostly in the mid and above segments, said the report.
Hyderabad, Pune, Ahmedabad, Mumbai, and Delhi are the top five tier-I cities witnessing maximum demand for home loans. A similar trend has been recorded in tier-II cities like Lucknow, Patna, Indore, Jaipur, and Agra.
In terms of the demand for Balance Transfers, New Delhi, Bangalore, Mumbai, Pune, and Hyderabad were the top five tier I cities, and Ghaziabad, Mohali, Noida, Indore, and Visakhapatnam the top five tier II cities.
For LAP, Bangalore, Hyderabad, Chennai, New Delhi, and Pune saw the most demand across tier I cities and Gurgaon, Jamshedpur, Patna, Faridabad, and Lucknow for tier II cities.
According to the report, Bank of Baroda, Indian Bank, SBI, HDFC and ICICI Bank are the most searched lenders on Magicbricks’ Home Loans platform.
Magicbricks is a part of Bennett, Coleman & Co, which published The Economic Times.
If the home loan portfolios of major banks, as reflected in the first quarter numbers, is any indication, Covid-19 has not deterred home buyers.
A comparative analysis of housing loan data of banks for the first quarter shows a significant increase ranging from six per cent to about 14 per cent compared with the corresponding quarter of the previous fiscal.
For State Bank of India, the home loan portfolio increased 11 per cent to ₹5,05,473 crore in the first quarter of the current fiscal ended June 30, 2021, constituting 23 per cent of the bank’s total domestic advances compared with ₹4,55,443 crore in the year-ago period. That Covid did not impact demand for home loans is also evident from the fact that in the previous year (FY20-21), SBI posted only a 10.72 per cent growth in the segment.
SBI is not alone. Canara Bank’s home loan portfolio, too, increased 13.15 per cent during the period at ₹65,136 crore. In the previous year, the growth in portfolio was only 10.6 per cent. Punjab National Bank is also in the same league as it registered a 6.1 per cent growth.
Key drivers
On what drove the surge in home loans, a senior SBI official said: “Bank employees braved the pandemic and processing of loan applications and disbursal were not adversely impacted. In the absence of corporate loan growth, there has also been greater focus on retail loans, of which home loans constitute a major chunk.’’
Sanjiv Chadha, Managing Director & CEO, Bank of Baroda, said: “Home loans are growing pretty much as per market.’’ During the pandemic times, home loans, along with gold and car loans, are seen as ‘very safe’ for business, say bankers.
The growth in home loans will be sustained in the current year too, say analysts. Banks are also stepping up efforts to sustain the growth.
SBI has sharpened its focus on housing loans. As part of its ‘Monsoon Dhamaka’ offer, it announced a 100 per cent waiver on processing fees till August 31. Before the offer, the processing fee was 0.40 per cent.
Other banks are also gearing up to woo customers with special offers for the coming festival season.
For Shriram Housing Finance (SHFL), which has completed a decade of operations, the second quarter this fiscal promises to be one of the highest quarters ever in terms of disbursements, says its MD & CEO Ravi Subramanian. In an interview with Mithun Dasgupta, Subramanian says the company would not need “significant” loan restructuring going forward as the market has improved. Edited excerpts:
How is the demand for housing loans after the second Covid wave in comparison to the first one?
After the first Covid wave, a lot of pipeline transactions just went on hold from March to May. People who came into the market in June saw a huge uptake from July (2020) onwards. In the last financial year, the third and fourth quarters were very good for most housing loan players. We also did record numbers as our disbursal last year was 95% more than the previous year.
This fiscal, there was a slowdown in demands. The pick-up has not been of the same nature as last year. Nevertheless, in July (2021), the business was back to last year’s pick levels. Demand for housing has picked up. I just hope that it sustains.
What percentage of housing loan demands are coming from people who already own houses?
There is around 10-15% increase in the number of persons who are building additional rooms in their existing houses, which means that people are going in for expansion. We have also seen a lot of people, who already own a house, coming in to buy a slightly larger house and clearly expressing an intent that they would sell off the old house to meet the liabilities. That too was a 10-15% increase over the previous quarters. So, there is an increase, there is a definitive shift towards people going in for larger properties.
SHFL’s disbursements for Q1FY22 stood at Rs 221 crore, against Rs 77 crore for the same period of FY21. What will disbursements look like going forward?
Q1FY21 was a very slow quarter. April and May this year was a washout. In June, we were back to about 80% of our normal disbursal. In July, we were back to our last year’s numbers. So, we are very much back on track in June and July, which means that business has picked up significantly. My company has grown through Covid-19, in the sense that my numbers before Covid were not as high as there are now. Pre-Covid, one year was a period of investment for us.
We had started transforming the organization, started growing the book, started building the distributions. So, we were on the growth path when Covid hit us. Q2FY21 was the first time our company crossed `500 crore disbursal in a quarter. This year, in July we already clocked `225 crore disbursal, which was about 30% more than what we did in June. Thus, for the company, Q2FY22 promises to be one of the highest quarters ever, if I go by the July trajectory.
What are the factors that contributed to the growth in numbers?
We had transformed the organisation in terms of areas of focus, customers segments and the products that we wanted to launch sometime in Q4FY19. After that, we have been investing in our teams and focusing on six states in south and west, and building our books. We aspire to hit about `400-500 crore in about 24 months, which we will. Today, we are one of the largest housing finance players in terms of growth in disbursal, assets under management, profitability and the portfolio quality of the new book. The portfolio quality of the new book is roughly about 77% of our total book, which is the best in class (in affordable housing loan) today. We believe in slow and steady growth.
What was the number of loans the company restructured in the first quarter?
In Q1FY22, we restructured around Rs 72 crore of loans. In the previous quarter, we had restructured loans of Rs 58 crore. Total, we have restructured roughly 3% of our book, out of which about 1.4% was in current up to 30 days when we restructured. So, it is not that we only restructured delinquent customers and higher bucket customers, but also genuine customers who had been paying and were going through some stress.
Collections in our restructured book are also very good. In fact, in July, on the new book, roughly 99% of our customers paid one EMI at least. I don’t think that we will be restructuring anything significant going forward because the market has improved.
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