Banks find safe haven in home loans as NPAs rise
Jan 30, 2014
Source : The Times of India


MUMBAI: As loans in infrastructure and small businesses turn bad and corporates fight shy of making fresh investments, banks are finding home loans a safe haven. As a result, home loans are among the fastest growing segments at 13.5% in the first nine months of the fiscal. This is good news for borrowers as banks are offering a better deal to home loan customers than to top corporates.

Data released by the Reserve Bank of India on sectoral growth of credit shows that bank loans to housing rose 13.5% during April to December 2013 to Rs 5,18,500 crore. Last year, the growth in outstanding home loans for the same period was 11%. This comes at a time when overall bank credit has grown 9.1% and credit to the industry has grown by only 8.1%.

According to Arundhati Bhattacharya, chairman, State Bank of India, bad loans in home segment are very low. This reduces the cost of credit for lenders as the bank does not have to set aside large amounts for defaults. This enables the bank to provide loans up to Rs 75 lakh at 10.1% for women and 10.15% for men.

Announcing the bank's results on Wednesday, Chanda Kochhar, MD & CEO, ICICI Bank, said that the lender has managed to grow its loan book largely due to retail loans. "We are continuing to strengthen retail franchise and pursuing growth in retail mainly secured housing and auto loans. Quarter-on-quarter, we have been able to increase share of retail to 30% of loans and advances. The bank's retail loans have grown 22% and mortgages have grown 23%."

Shinjini Kumar, director, PricewaterhouseCoopers, said, "Banks consider home loans as safe because the loan-to-value ratio in home loans is low." She added that the tax structure also encourages the purchase of second house as an investment as the interest expenditure on the home loan can be used to offset earnings from the property. "Individual companies may not see the risks in their portfolio but if such lending increases, there is a possibility that risks may build up in certain pockets. Once you go out of the large cities, it becomes difficult for banks to source quality borrowers and this results in concentration of loans in certain pockets and this could lead to risks at the systemic level," said Kumar.

Bankers across the board said that housing was seen as a safe option at a time when bad loans were on the rise in infrastructure, metals and textiles - the top three segments in terms of bank lending and also in terms of non-performing assets. "In the personal loans segment, consumer durables and housing showed an increase, while vehicle loans witnessed lower growth in this year. Credit card loans, though not very significant in the overall credit, has also witnessed negative growth. Given that large part of the auto industry sales is driven by bank credit, this lower growth number could be indicative of slow growth in this segment," Madan Sabnavis, chief economist at Care ratings, said in a report.





Latest Realty News

Protecting patents: India worst in world
Jan 30, 2014
DELHI: Despite the current decade being called India’s “decade of innovation”, the country has been ranked at the bottom of the list of 25 countries in terms of its intellectual property (IP) environment. According to the 2014 International Intellectual Property (IP) Index by the US Chamber of Commerce’s Global Intellectual Property Center (GIPC), India’s percentage score has fallen from 25 per cent in 2012 to 23 per cent.
Noida to allocate Rs. 9, 000 crore for annual budget
Jan 30, 2014
NOIDA: The Noida authority on Wednesday said that it is likely to approve Rs. 9, 000 crore annual budget for financial year 2014-15, in its board meet scheduled to take place on February 12.
New directive from apex court on Greater Noida West
Jan 30, 2014
DELHI: In a recent hearing in the land-acquisition case pertaining to Greater Noida West (formerly Noida Extension)—comprising villages like Patwari, Bisrakh, Khairpur, Roja, Itehda, Haibatpur, Saini and others—the Supreme Court has directed the protesting farmers to file their counter-affidavit within three weeks with regard to their objections to the compensation formula worked out between them, the developers and builders, and the Greater Noida Industrial Development Authority (GNIDA).
Cosmic Group launches two new projects in Noida
Jan 30, 2014
NOIDA: Cosmic Structures Limited is the real estate division of the prestigious Cosmic Group. They are an emergent Real Estate Developing company in the Indian realty space with more than two decades of satisfactory deliveries. Their passion and aim is to be a respectable and trustworthy builder & developer in the competitive world of real estate in India and abroad.
Pune: KUL and GEMS Education to launch an international school
Jan 30, 2014
PUNE: Close on the heels of the success of best luxury project at Silicon India’s Pune Real Estate Awards 2014, Mumbai-Pune developer Kumar Urban Development Limited (KUL) along with GEMS Education today announced the launch of a world class international school GEMS Modern Academy(GMA) in Pune.
Mint producer KV Group enters realty business
Jan 30, 2014
DELHI: KV Group, a leading producer of mint, has forayed into the real estate sector with its first housing project in Greater Noida and is expecting a sales realisation of Rs 300 crore over the next three years.
Bad debt: Hiranandani project auction on March 3
Jan 30, 2014
MUMBAI: Housing Development Finance Corporation Ltd (HDFC) on Wednesday invited bids to auction 158 acres of Hiranandani Gardens near Chennai after the developer failed to repay a Rs 539 crore loan.
Landmark hotel to make way for apartments
Jan 30, 2014
CHENNAI: The hospitality sector in Chennai is going through rough weather with many a hotel being put on the block for want of patronage. In less than a year, the city is all set to lose its third hotel to real estate promoters.
Police seek annulment of Artha Tatwa Group’s assets
Jan 29, 2014
BHUBANESWAR: The Commissionerate Police have written to the State Finance Department for annulment of property of non-banking financial company Artha Tatwa Group that allegedly duped investors of more than Rs400 crore.
RBI seeks to control inflation: India Inc
Jan 29, 2014
MUMBAI: The Reserve Bank of India's move to increase repo rate by 0.25 basis points is aimed to control rising prices rather than encouraging economic growth, say CEOs.

Latest Realty News Of State

Realty Talk's