Even as home buyers put off purchases in anticipation property prices could correct, State Bank of India (SBI) on Monday made home loans cheaper for new customers. Loans of up to Rs 30 lakh will cost women 8.35% and others 8.4%; that’s 25 basis points (bps) less than rates available a few months ago. Women borrowing more than Rs 30 lakh will need to pay an interest rate of 8.5% while others will cough up 8.55%.
Rival ICICI Bank charges salaried persons an interest rate of 8.7% for loans up to Rs 75 lakh while mortgage specialist HDFC charges between 8.5% and 9% for a loan of up to Rs 75 lakh. So far, Bank of Baroda’s product is the most attractive at an interest rate of 8.35%.
With little demand for corporate loans, lenders are trying to make mortgages more affordable. A CLSA report says mortgage rates are at 12-year lows, having dropped 150 bps in the last two years; every cut of 100 bps is equal to a 5-6% price cut, CLSA notes. But this may not be enough to nudge buyers; loans for housing grew at a slower 15.2% year-on-year (y-o-y) in March compared with 18.8% growth in March 2016, data from the Reserve Bank of India (RBI) show.
Clearly, there’s no rush. Stocks of unsold apartments are piled high and even before demonetisation, inventories were not small. At last count, there were 6.7 lakh unsold residential units across the country with 1.55 lakh in the Mumbai Metropolitan Region (MMR) alone. Registrations of property sales in MMR, which had fallen to a six-year low in November and December, remain low.
If 2016 ended with the lowest number of residential launches and sales, 2017 hasn’t got off to a great start, say builders. Banks, however, are trying to prod potential customers to buy homes. SBI had revised rates in January, effecting a steep 90 bps 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.
The country’s largest lender is also hoping to cash in on the push to affordable housing. “We have come out with a special offering of lower rates for the category,” said Vaijinath MG, CGM (real estate and housing), SBI.
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 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 Rs 18 lakh. The move, however, is likely to benefit housing finance companies (HFCs) rather than banks, analysts say.
According to a report by Crisil, that the 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 `15 lakh.