Home loans disbursed by banks, housing finance companies (HFCs) and other non-banking financial companies (NBFCs) stood at Rs 14.4 lakh crore at the end of March, up 16% from the corresponding figure of Rs 12.4 lakh crore a year ago, according to Icra. Between March 2015 and March 2016, housing credit had grown at the rate of 19%, showed data from the ratings agency. At 17.8%, the non-banks saw faster growth in housing credit than banks, which clocked a 15.2% year-on-year (y-o-y) growth in home loans in March. These figures, however, predate the Reserve Bank of India’s (RBI) June decision to lower risk weights and standard provisioning on home loans made by banks — a move likely to have freed up capital worth Rs 1.22 lakh crore for banks.
This, in turn, resulted in the country’s largest lender, State Bank of India (SBI), reducing interest rates on home loans of more than Rs 75 lakh by 10 basis points (bps) to 8.55% for salaried women and 8.6% for others. Its large rivals are yet to slash lending rates in this particular category. Rates on affordable housing loans, typically of amounts under Rs 30 lakh, underwent a round of cuts in May, with SBI, ICICI Bank, HDFC, Axis Bank and Indiabulls Housing Finance all bringing down rates in this category to between 8.35% and 8.4%.
In a note released on Tuesday, India Ratings said it expects disruption in the above-Rs 50 lakh segment as HFCs get into a likely rate war with banks and among themselves. “The rate competition will not only impact the incremental loan growth in the high-ticket price-sensitive borrower segment but will possibly have implications for the existing portfolio in the segment, as some existing borrowers may shift their portfolios to banks to take advantage of widened differential,” the note said, adding that about 20% of the housing portfolio of large HFCs is comprised of loans more than Rs 50 lakh.
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HFCs currently have a share of 33-34% of the housing finance market, said Karthik Srinivasan, senior vice-president and head of financial sector ratings at ICRA, adding that in terms of incremental growth, HFCs have done better than banks in recent months. India Ratings said it expects mid-sized HFCs to grow at least 8-10% above the system average, driven by a combination of higher volumes and ticket sizes. Larger HFCs will lean more heavily on ticket sizes in the home-loan category and traction in non-core categories for incremental growth.