Home loan segment looks up as HDFC, SBI approvals rise

Written by Kakoly Chatterjee | New Delhi | Updated: Nov 1 2009, 04:16am hrs
The market for home loans is buzzing again. Both the leading players State Bank of India (SBI) and Housing Development Finance Corporation (HDFC) have seen a significant improvement in their loan approvals during the first half of this financial year 2009-10.

While for SBI, approvals of home loans has reportedly increased by 25% to Rs 11,000 crore for the first half of the financial year, 2009-10 compared to the corresponding period last year, for HDFC, approvals have gone up 18% at Rs 28, 418 crore compared to Rs 24,180 crore during the corresponding period last year. SBI is slated to announce its results today.

Countrys largest bank expects a growth of 30% in loan approvals by the end of this year. It expects to sanction around Rs 25,000 crore by the end of this financial year while HDFC is planning to grow in both approvals and disbursals by 20% during the current year.

The return of strong numbers in the home loan market is a result of renewed buying interest by the middle class, after the setback of 2008-09. Developers are making a pitch for affordable housing that is attracting buyers. The softening of interest rates has also led to the rise in demand. The current floating rate for HDFC stands at 8.75% for loans up to Rs 15 lakh, 9% for loans in the range of Rs 15 lakh to Rs 50 lakh and for loans above Rs 50 lakh, the interest rate is 9.5%. The numbers will also signal a return of better economic performance in the economy that has seen consumer confidence ebbing for the last two quarters.

Between them, State Bank of India and HDFC make up for more than 50% of the market for home loans. HDFC accounts for about a third of the market. The rest of the market share is divided between housing finance companies and other scheduled commercial banks. Despite being a late entrant, SBI has rapidly climbed the market share ladder by aggressively pitching its low interest rates that start at 8%.

Home loan portfolio has grown both in terms of numbers and value for SBI. While tier I cities have contributed to the growth in portfolio in value terms, tier II cities have contributed to the growth in volume. Out of 14 circles, nine have registered major growth while four are lagging behind. However, none of the circles have experienced any negative growth, an SBI official said .

The circles that have grown are Mumbai, Hyderabad, Delhi, Bangalore, Chennai, Jaipur, Chandigarh, Thiruvananthapuram, Bhopal and Kolkata. On the other hand, 4 circles including Bhubaneswar, Patna, Lucknow and the north eastern region have not shown significant growth.