Home loans in India: Slow & Sticky
Business Standard reports on the larger-than-expected drop in home loan growth in India - Home loan party over:
Home loan growth rates are expected to fall to 15% after two years of robust 33-35% growth and sharply below the expected overall credit growth of 22-24 %.
Till recently, borrowers could avail of loans up to 90-95% of the purchase cost of a residential property. Now banks are selectively moving to an 80% LTV, the norm prevalent over three years ago.
Home loans form 12-35% of the loan portfolios of banks.
More interestingly, Mint reports that asset reconstruction companies (ARCs) are now seeing growth in “sticky” home loans - Firms start circling troubled home loans:
. . . the quantum of sticky loans in the home-loan segment have risen 33% to Rs 6,000 crore in March 2007 from Rs 4,500 crore in March 2006. As the total housing-loan portfolio of banks and housing finance firms is about Rs 200,000 crore, in percentage term, bad loans are about 3%.
. . . some bank executives now predict that the quantum of bad home loans will go up to Rs 12,000-15,000 crore in the next three years.
As on 31 March 2007, the total home-loan book of SBI was Rs 38,000 crore. HDFC’s mortgage book stood at Rs 53,000 crore as on 31 December 2006, and that of ICICI Bank at Rs 60,000 crore.
Of course, if you looked at real estate listings in Bangalore (Craiglist), you wouldn’t know that there are such issues in the home loan business. Brokers (sellers’ agents) remain as demanding & obnoxious as ever!
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