Fewer takers for home loans

Caught in the painful pincer grip of high interest rates and unaffordable property prices, many Mumbaikars are saying no to their dream house. Ameya Bhise investigates

Last month Shyam Rane heaved a sigh of relief. The 37-year-old registration officer at KEM Hospital paid back the Rs6,50,000 housing loan he had taken from the Jan Sewa Cooperative Bank.

With the rate of interest touching 10.5 per cent, Rane’s EMI had touched an unaffordable Rs7,300. Left with no other option he sold off his Kandivali flat. “I have two children and needed money for their education. The EMIs were becoming a burden for me,” Rane says.

Rane’s is not an isolated case. The Crisil Report on Mortgage Finance shows the downward trend in the housing loan portfolio of banks. It’s a fact highlighted by the RBI’s Macroeconomic and Monetary Developments Report 2006-07.

“The housing loan has dropped to Rs50,622 crore in December 2006 from Rs51,191 crore in October 2006… also the amount that banks have lent to the real estate sector has also reduced by 8.1 per cent from Rs17,260 in October 2006 to Rs15,859 in December 2006,” says the report.

Crisil says the growth in the home loan market may slow down from around 33 per cent annum to around 15 per cent. “The growth will be affected due to high interest rates and higher property prices, which impact the borrower,” says Tarun Bhatia, head, corporate and government ratings, Crisil.

“We have seen a 15 to 20 per cent reduction in people taking home loans,” says Vinayak Ghag, loan officer, LIC Housing. Such is the case at IDBI too. “Over the last two months we have witnessed a drop of 8 to 10 per cent,” says Rohit Gupta, assistant general manager, IDBI.

State Bank of India (SBI), however, does not attribute the fall in figures to the hike in interest rates. “The number of borrowers has gone down by 20 per cent in the last nine months. It’s a result of high property prices and not interest rate hikes,” says M L Paulson, deputy general manager.

SJ Ghotage, deputy GM, Saraswat Bank, feels a combination of high interest rates and property prices has impacted home loans. R Vishwanathan, GM, Union Bank, seconds Ghotage’s logic: “There has been a slowdown, but it can’t be attributed only to the hike in the interest rates on home loans.”

But HDFC seems to have bucked the trend. Renu Karnad, executive director, HDFC says, “There has been no reduction in the number of people applying for home loans. Even though the investors from the real estate market have exited, there are real users who are still there and they are taking home loans,” she told DNA.