While most banks have been witnessing a slowdown in their home loan portfolios due to higher interest rates since last year, Housing Development Finance Corporation (HDFC) has in fact, reported a steady rise in this segment. HDFC?s total loan disbursements since the beginning of this fiscal, stood at Rs 32,000 crore, as against Rs 26,178 crore in 2006-07, despite a higher interest rate scenario. According to HDFC executives, higher interest rates have not impacted the finance company as much as shooting real estate prices.
?It is property prices and not the interest rate that dominate decisions on property purchases,? said Renu Sud Karnad, joint managing director of HDFC. She added that while high property prices have had an impact on the investor class, the end user market is still buying, based on his affordability. She pointed out that some regions have been witnessing downward corrections in property prices. Bangalore and Gurgaon are two such places that have witnessed up to 20% downward revisions in property prices.
However, consumers have also began postponing their requirements for a home loan, while many of them have moved over to acquire a home in Tier II and Tier III cities of the country, like Lucknow, Pune, and Ahmedabad.
Speaking about the overpricing of residential property, Karnad said that there are quite a few pockets where the prices are still high for various reasons. ?This news has come in from various parts of the country. Many developers, instead of reducing prices, are offering freebies. They say that they will get your interiors done, give you free air-conditioners or pay even six of your EMIs. The fact that there were no major launches of new projects by developers during this festive season, also reflects the demand situation. Though the property prices haven?t corrected in a few mega cities, sales have slumped,? she said.
Meanwhile, speaking about liquidity and inflation, which have been primary concerns of the Reserve Bank of India (RBI), Karnad said, ?RBI has been facing a tough challenge of managing the liquidity and inflation that has been its primary concern, along with interest rates. It has been able to manage all the above elements very judiciously without impacting the economic growth. The end users continue to buy properties as they intend to use them, and in our case we have seen interest rates not having much of an impact,? she said.
On the home loan trends for 2008 in HDFC, Karnad said that they?d be able to grow their loan approvals and disbursements by 25% each, while maintaining the loan quality. Going forward, HDFC foresees a very stable interest rate scenario for the next 3-6 months.
?During the last couple of years, the Indian economy has been growing at a rate of around 8% to 9%. The credit offtake has been unprecedented until recently. We think the economy will continue to grow at this pace for the next couple of years, and hence expect interest rates to move down to the levels of 2004. Though it is desirable, it seems difficult.?