Indian banks are vying for the right to disburse home loans, having seen growth in this area in a difficult economy. Banks’ total home loan portfolio increased 9.1% to Rs.14.59 trillion in the year to March 26. Although this was smaller than the 15.4% increase seen a year before, it was a boost following the initial drop in the pandemic’s first few months.
Low-interest rates and the transition to remote working, according to senior bankers, are to blame for the increase in home loans. People will purchase houses far away from pricey office centres as work-from-home becomes the trend. Banks are gradually focused on this market, seeing the opportunity and the need for more secured loans on their books.
According to C.S. Setty, managing director of State Bank of India (SBI), there has been a greater migration of home loans towards banks since the crash of Dewan Housing Finance Corp. Ltd (DHFL). Following mounting tension at the mortgage lender, the central bank referred DHFL to the insolvency tribunal in November 2019. The Piramal group recently secured an offer to buy the bank and is now pending regulatory approval.
“As a result of banks’ willingness to do more secured loans, as well as the underperformance of some of the major non-banking financial companies (NBFCs), the portfolio of bank home loans has grown. “Everyone will follow this asset class because they see meaning and stability in it,” Setty said.
Of all commercial banks, SBI has a 35 per cent share of home loans. The lender, which now has an Rs.5 trillion home loan portfolio, expects to double it in the next five years.
Home loan disbursements at private sector lender Axis Bank increased by 73 per cent year-on-year (y-o-y) as of March 31, the fastest development in the secured market. Amitabh Chaudhry, Axis Bank’s chief executive, told analysts on April 27 that “our home loan logins and disbursements for Q4FY21 reached highest ever quarterly figures, led by increased rigour and rhythm and decreased turnaround times as a result of project initiatives.”
Another privately-owned lender, Kotak Mahindra Bank, saw a 13 per cent increase in home loans and loans against land (LAP). In FY21, it reduced the size of its unsecured book from 7.5 per cent to 5.8 per cent of the loan book, down from 7.5 per cent a year earlier.