Home Loan Disbursement improves despite slow down in Real Estate Sector.

This could be slightly feel good news that the amount of home loans banks disbursed in the first three quarters of the last financial year is higher than what they had in the corresponding period of the previous year. It seems that genuine buyers have come on the forefront to immediately grab the opportunity to get budget deals. The genuine buyers have been getting competitive deals and lucrative discounted deals in the slow down time.

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This could be slightly feel good news that the amount of home loans banks disbursed in the first three quarters of the last financial year is higher than what they had in the corresponding period of the previous year. It seems that genuine buyers have come on the forefront to immediately grab the opportunity to get budget deals. The genuine buyers have been getting competitive deals and lucrative discounted deals in the slow down time. The demand of budget housing is still on the track without any down fall and real buyer does not want to miss good deal. This development is good symptom for the housing sector being in gloom for some time.

Major Indian Private bank HDFC Bank, which commands 40% market share in home loan segment, experienced a growth of 22% in its disbursal of home loans during the combined period of the first three quarters. It disbursed Rs. 27,211crore during the nine month period ended December 31, 2008 compared to Rs22,285 crore during the same period in the previous year.

The performance shown by SBI major  public sector bank is highly encouraging. State Bank of india is expecting a growth of Rs 8,000 crore in its home loan portfolio during the last financial as compared the year prior to it. In the last few quarters its home loan portfolio has been growingbyaround20%.

In order to attract customers, SBI has come up with a one-time window facility through which home loans sanctioned till April, 2009 will be disbursed at 8% interest rate for the first one year. After that the interest rate of the loan will depend on which slab it belongs to.“The average size of a SBI home loan is Rs 14 lakh and the growth is from the tier II cities”, as per the sources of  SBI.

ICICI bank refused to share its loan disbursal figures with FE. Both SBI and ICICI bank account for about 20% to 25% market share in the home loan segment. Since February 2009, HDFC has also reduced rates for home loans in the lowers lab(up to Rs 30 lakh) from 9.75% to 9.5%. Incidentally the average ticket size for home loans for HDFCisRs15.3lakh.

As per the sources of HDFC the queries have been increased by around 20% regarding loan upto 15 Lakh.. We expect the demand to improve over the next couple of months as the total cost of acquiring the property has come down substantially.” Renu Sud Karnad,joint managing director, HDFC Ltd said.

Bankers are expecting the scene to improve in the coming quarters because the factors which affect the direction of the housing sector is looking positive. Chandra said, “Demand for home loans is directly related to the price of properties, interest rate and people’s income”.

As per the experts the interest rates has to go down and market price of properties becoming lower and more stable, it is likely that the budget housing sector will start looking up sharply. The only road block could be the lower income of people and fear of political uncertainty. However, this is not a problem of gigantic proportions so given that everything looks positive the demand for home loans and the housing sector are both going to go up. Asked why the disbursal of home loans has not gone up substantially post the stimulus packages, Karnad responded, “This is because interest rates per se do not deter the actual users who want to buy a property for their own use. It is imperative for one to understand that interest rates are cyclical in nature and considering that housing loans are long-term commitments of 15-20 years, there ought to be some periods during the tenure of the loan when interest rates move up and some periods when they move down”