Banks bet on home loans to meet target

Mumbai, Dec. 25: Indian banks are focusing on growth in home loans to make up for the slow growth in their overall loan book. This is good news for home loan borrowers as banks are shifting from risky segments like unsecured lending — personal loans, credit card loans to colateralised lending like home loans.

A study by First Global India Research indicates that banks have identified home loans as the key growth segment and hence continue to offer low interest rates on the same.

It says in their discussions with the managements HDFC Ltd estimates growth of 20-25 per cent and disbursements of Rs 3,000 crore under the special home loans scheme while IDBI Bank expects a disbursement of around Rs 1,000 crore and a growth of 10-15 per cent. It is targeting the affordable segment for loans upto Rs 20 lakhs.

ICICI Bank it says has not set up any specific target but it has the largest exposure to the home loan segment of nearly 25 per cent.

Axis Bank has 15 per cent, Kotak Mahindra 12 per cent, SBI 11 per cent, Bank of Baroda nine per cent and PNB six per cent.

Despite the cut-throat competition between the banks for customers for low interest home loans, the combination of lower property prices, attractive interest rates an aggressive promotions appear to be working well for the banks are witnessing a continuous pick up in disbursals.

There is just on negative looming on the horizon which could spoil the party for cheap home loans and that is if the Reserve Bank of India (RBI) changes its easy money policy.

First Global has raised concerns that in the Q4 of fiscal 2010, the RBI could exit its accommodative money stance and this would mean increase in interest rates. This in turn would put pressure on bank margins and they are charging extremely thin spreads on home loans in an effort to garner higher volumes and increase market share.