In the current 2011, as the indian housing market in the West slowly picks up, the Indian market may be in for slack. SBI ( State bank of India) withdrew its home loan scheme with effect from 2011, May, after RBI ( Reserve Bank of India ) raised concerns on the borrowers' ability to repay them over longer tenures. After a period of sustained growth, bankers expect a moderation in home loan growth in the coming months. Rising interest rates and property prices are once again set to hit demand for home loans, say bankers. The impact of the slowdown is already visible in the priority sector lending portfolio of banks.
According to RBI data, growth in indian housing loans had fallen from a high of 31.2% in December 2006 to 4.1 per cent in March 2009 in India. After SBI launched its special home loan scheme, home loan portfolio of banks in India rose 30% on a year on year basis till September 30 2010, against 20% in 2009-10.
But, India's largest public sector bank SBI, expects a moderation in the growth in home loans.
Mr. Diwakar Gupta, MD (Managing Director) and CFO (Chief Financial Officer), SBI said, 'We expect a slowdown, a moderation in the home loan market. It has been evident in the last two quarter. It is difficult to estimate the extent of the moderation.
About 30-35% of the Indian home loan market is currently accounted for by the teaser home loan market. The withdrawal of teaser loans would have a marginal negative impact on the home loan demand.
Experts said''The interest rate hike also expected to play a dampener. Demand for home loans is likely to be impacted due to high interest rates. The impact would be more visible in the next two months. Both investors and home loan buyers are likely to wait for few months before buying property"". .
SBI launched the special home loan scheme in 2008, under which it offered an interest rate of 8.5 per cent for a loan of Rs 5 lakh and 9.25 per cent for a loan of Rs 20 lakh, with a reset clause after every five years. The scheme was tweaked several times since then.
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