Axis Bank and Indiabulls Housing Finance are the latest lenders to have cut interest rates on affordable housing loans. Home loans up to Rs 30 lakh at Axis Bank will now be available at 8.35% for salaried borrowers and at 8.4% for self-employed borrowers, down 30 basis points (bps) each. Indiabulls will charge the same rates, but the segmentation at the NBFC will be in terms of gender, with women paying 8.35% and others 8.4%, 15 bps lower than earlier.
The move brings the two institutions’ home loan rates in the affordable segment on par with those of State Bank of India (SBI), ICICI Bank and mortgage specialist HDFC, all of which have reduced home loan rates in the last 10 days. Lenders have of late tried to push lending for housing, thus making mortgages more affordable. According to a report by CLSA, mortgage rates have come down by 150 bps in the last two years and are now at 12-year lows, and this is gradually improving affordability. Every 100 bps of mortgage-rate cut is equal to a 5-6% price cut, CLSA has noted.
But this may not be enough to nudge buyers, with home sales remaining sluggish in Q4 despite the January round of rate cuts by banks, when SBI had effected a steep 90-basis point cut to its one-year MCLR, and bringing it down to 8%. ICICI had cut its one-year MCLR by 70 bps to 8.2% and HDFC had lowered its benchmark rate by up to 45 bps.
According to data from real estate consultancy JLL India, 27,000 homes were sold across India during the quarter ended March, 35.7% lower than the year-ago period. Unsold units fell by 4.6% to 4.33 lakh. Data from the Reserve Bank of India corroborate this, with loans for housing growing at 15.2% year-on-year (y-o-y) in March 2017, compared with an 18.8% growth in March 2016.
The general slowdown in home purchases is hurting developers. Gopal Sarda, group CEO, Kolte-Patil Developers, told FE, “The real estate market had seen some fluctuations in recent times. The implementation of demonetisation and the introduction of RERA (Real Estate Regulation Act) and the GST (Goods and Services Tax) only made home buyers delay their decision of home buying.” In March, the government had raised the annual income ceiling for families eligible under the credit-linked subsidy scheme (CLSS) to up to `18 lakh. The move, however, is likely to benefit HFCs rather than banks, analysts say.
According to a Crisil report dated May 8, assets under management of pure-play affordable HFCs have risen nearly 50% in the past fiscal to Rs 23,000 crore as on March 31. “The high growth has also led to increase in market share of these new pure-play players in the overall affordable housing finance sector from ~10% as on March 31, 2016 to ~15% as on March 31, 2017,” the report said. Crisil defines affordable housing loans as those with a ticket size less than Rs 15 lakh.