At a time when most asset classes, including equities and debt, are on an upswing, the slump in residential demand on account of high real estate prices is now evident in the demand for housing loans from banks.
A look at the monthly data released by the Reserve Bank of India shows that in the six-month period between April and September 2014, the sector witnessed a dip in the value of home loans disbursed (in absolute numbers) by banks as compared to the corresponding period last year.
The housing loan outstanding in the period between April and September 2013 rose by Rs 45,600 crore — from Rs 4,60,000 crore in March 2013 to Rs 5,05,600 crore in September 2013. However, in the period between April and September 2014, it rose by Rs 39,600 crore — from Rs 5,40,800 crore in March 2014 to Rs 5,80,400 crore in September 2014. Compared to the previous year, that is a drop of Rs 6,000 crore in disbursement numbers.
The sector has also seen a constant decline in growth rate, in line with the overall credit growth over the last one year.
The RBI data shows that the home loan outstanding, which grew at the rate of 20 per cent (year-on-year) in the month of September 2013, has softened over the last 12 months and was down to 14.8 per cent in September 2014.
The slowdown has also resulted in a rise in unsold inventory across major markets, which have witnessed a drop in residential real estate prices. The Residex index prepared by National Housing Bank shows that residential housing prices in major cities such as Delhi NCR, Mumbai, Bangalore, Hyderabad, Chandigarh and Jaipur have remained under pressure — either softening or staying flat — in the first six months of 2014.
The inventory levels too have been on the rise. A report released by Knight Frank shows that the unsold inventory for the Mumbai Metropolitan Region and NCR at the end of June 2014 stood at 2,13,742 units and 1,67,000 units, respectively.
Industry experts feel that the dip in growth rates in housing loan disbursements is on account of the slowing demand in the premium segment (houses priced over Rs 75 lakh), but housing finance companies (HFCs) see it as a reflection of the public sector banks (PSBs) losing out on the mortgage business in the housing segment.
“While the overall mortgage growth for HFCs is at 21-22 per cent, that of private banks is between 20 per cent and 25 per cent. It is slowest for PSBs, where the growth rate is around 10 per cent,” said Gagan Banga, vice chairman and MD, Indiabulls Housing Finance. “HFCs and private banks source their customers at the builder’s site and few customers go to PSBs. The slowdown in growth for PSBs is getting reflected in the RBI data.”
He added that while HFCs had a market share of around 27 per cent in 2008 in the home loan segment, it rose to 37 per cent by 2013. The biggest losers, he said, have been PSBs.
HDFC Ltd also maintains that growth has been strong. Keki Mistry, vice chairman and CEO of HDFC, said the company has been witnessing strong growth and the slowdown in growth numbers “may be on account of high base”.
However, the slowdown is affecting everyone’s growth, say industry experts. Pranab Datta, former chairman of Knight Frank India and an independent consulting advisor, said that the dip in growth reflects the impact of weak demand in the premium segment, which is affecting all financiers.
“The real estate market has definitely slowed down, especially in the western and the northern region and mostly in the residential segment priced over Rs 75 lakh. This is leading to pile up of inventory and dip in demand for home loans and their disbursements,” said Datta.