Banks have witnessed strong home loan growth in the third quarter of the current fiscal driven by festive demand. The home loan portfolio of lenders has expanded by over 15 % in the previous quarter, reflecting that elevated interest rates have failed to dampen the housing demand.
“The third quarter is always good for retail loans, including home loans, because demand is high due to festivals. Builders launch new residential projects because families like to book or buy new houses before festivals,” Virat Diwanji, Group President and Head – Consumer Bank, Kotak Mahindra Bank, told FE.
During the third quarter, real estate companies have seen a surge in the sale of residential units, coinciding with festive season. This period is traditionally busy for real estate firms, as they unveil new projects to attract homebuyers who often wait for the festive season to make property purchases.
The high interest rates did not have a significant impact on home loan demand because buying a house is still a basic need for an individual in the country, said Diwanji. According to real estate consultant Anarock, housing sales in the top seven cities in India, including New Delhi, Mumbai, Bengaluru, Pune, Hyderabad, Chennai, Kolkata, witnessed a year-on-year surge of 31% to reach 4,76,530 units in 2023 compared to 3,64,870 units in 2022.
Among the large banks, the home loan portfolio of ICICI Bank and Bank of Baroda has risen by nearly 16 % year-on-year in the third quarter of current fiscal while Punjab National Bank and Kotak Mahindra Bank witnessed nearly 15 % growth in the home loan book. The largest private lender HDFC Bank recorded 3.6 % on quarter-on-quarter basis. Bank’s year-on-year growth is not comparable due to its merger with mortgage lender HDFC Ltd last year. Country’s largest lender State Bank of India has witnessed 13.2 % growth in its home loan book in the third quarter.
“Within the retail, the home loan portfolio which is our secured book and relatively safer advance is growing at a strong 16%,” said a senior official of Bank of Baroda.
Interest rates on home loans have risen consistently over the past two years due to hike in repo rates by the central bank. The weighted average lending rate on home loans has crossed 9% and is at 9.12%. Banks have raised interest on home loans in response to a series of hikes in the repo rate by the Reserve Bank of India, which has raised the policy rate by 250 basis points since May 2022.