Home Loan Demand Falls by 15-20%

July 18, 2007	(1 votes, average: 5 out of 5)  Loading ...
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A steady increase in home loan interest rates have pulled home loans disbursement by 15-20% in first three months of the current year. The heat of soaring property prices as well as loans can easily be felt in metros and tier-I cities.

Home loans disbursement stood at Rs 50,600 crore in 2006, an increase of 30% over the previous year.

However, the Central bank has earlier shown its discomfort with the sharp appreciation in home loan demand. Currently, banks and financial institutions are charging around 9.25% - 10.5% on home loans.

There has been a sharp drop in the demand for personal loans. And home loans comprise 50% of the total personal loan portfolio, say bankers.

Considering the inflation to have dropped below the 5% mark, banks may reduce the interest rates in the next few months. It would then certainly result in an immediate pick up in demand for home loans.

As far as speculative purchases are concerned, they largely focus at a reduction in investments. The Reserve Bank of India, in its annual monetary policy, reduced the risk weight on home loans to individuals from 75% to 50% for loans up to Rs 20 lakh which offer a little relief to first time buyer.

Also, non performing assets (NPA) from the home loans are likely to rise as an immediate outcome of the sudden increase in interest rates. Since home loans fall under the category of secured loans, an increase in the NPA level can take place due to the rise in interest rates, say industry experts.

News Published Under:   Home Loans |

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