For the first time, in percentage terms, banks and housing finance arms of insurance companies have shown higher growth than the market leader Housing Development Finance Corporation (HDFC).

Saraswat Cooperative Bank has shown the maximum growth followed by public sector Punjab National Bank (PNB). PNB has pegged the interest rate on loans between Rs 5 lakh and Rs 10 lakh at 13.8 per cent, while Sawaswat Cooperative Bank charges 14 per cent for the same segement--lower than HDFC interest rate of 14.5 per cent.

Among banks, Corporation Bank and Bank of Baroda charge the lowest interest rates at 13.5 per cent for loans between Rs 5 lakh and Rs 10 lakh. BoB Housing has managed to increase business by nearly 50 per cent inApril-June 1999.

PNB deputy general manger in charge of housing loans in western zone LP Agrawal says: "The number of loan applications has increased by 50 per cent and the sanctions have increased by 64 per cent since we are offering loans at a very competitive rates." LIC Housing Finance has posted 33 per cent rise in its disbursements. Says chief executive officer of LIC home loans Kranti Sinha: "If we include the corporate disbursements for the quarter we will touch a total disbursement figure of over Rs 290 crore. The budget announcement of raising the tax exemption limit on annual interest payment towards housing loans from Rs 30,000 to Rs 75,000 has given a filip to housing loans. Our target for the next quarter is to disburse Rs 300 crore."

BoB Home Finance company secretary BR Bajaj claims that the bank has spread its presence in nine states with 24 offices widening the customer base. "Most of the 1,270 applicants we have had this quarter are located in Gujarat, Maharashtra, Rajasthan and southIndia," says Bajaj.

Banks are focussing on the housing loans ever since the Government has made it mandatory that 3 per cent of the incremental deposits must go to this sector.

INSIGHT
Government policy pays off

The trend in the housing finance sector that was seen within a month of the last union budget being announced is continuing. Despite the huge gains seen by LIC Housing Finance in the quarter, the noteworthy development has been the rapid gains being made by the commerical banks in the HF sector. Though banks do not have a significant cost advantage, the housing finance sector provides an ideal opportunity to deploy their large surplus deposits at a lower risk.

The growth in housing is also an indication that the Government's policy of boosting industrial demand through housing starts may be working. Cement sales, in particular, have been boosted substantially.

Aaron Chaze