The rise in home loan rates in the past few months since the Reserve Bank of India (RBI) started hiking the repo rates has not dented the demand among homebuyers, Dinesh Kumar Khara, Chairman of SBI, said at BT MindRush 2023 on Wednesday. Since May 2022, the central bank has increased the rate by 250 bps over inflation concerns. This has resulted in a hike in lending rates by most banks as they use the repo rate as an external benchmark to link their floating-rate home loans.
Despite the hardening rate scenario, the SBI, which is the country’s leading lender, reported a growth of 29 per cent. “We don't see any slowdown when it comes to home loans. Our home loan sanctions last quarter were off by 29 per cent,” said Khara at BT’s flagship event.
He added that there is a pent-up demand post-Covid-19 as people are looking at bigger accommodations. “We have noticed this demand across the country – in rural, urban areas. It is a very positive sign of growth,” Khara said.
Earlier, SBI in a study stated that fewer people are applying for non-premium loans or loans less than Rs 30 lakh due to higher home loan rates.
The study, which was published last month, found that despite rate increases, the commercial banks’ credit growth has been strong in some segments. For instance, there have been more borrowers for housing loans of over Rs 50 lakh.
It further noted that home loans up to Rs 30 lakh disbursed by all SCBs have declined on average in FY23. But the share of loans over Rs 50 lakh has increased, pointing to an increasing asymmetry.
Many real estate companies and experts have pointed out that India's affordable housing market is in a critical condition. These houses have become unaffordable for some buyers, mostly blue-collar workers, who were affected by the economic turmoil caused by Covid-19.
The SBI study showed that they are delaying home purchase and moving to rental units due to high costs. Premium and luxury buyers were less affected by the pandemic.