Rising home prices and the uptick in inflation have taken a toll on the
offtake of home loans. This trend is most pronounced in the larger metros, chiefly Delhi and Mumbai.
"The
home loan deals have gone down drastically to the tune of 20-25 per cent in Delhi and Mumbai in the last six months. The first half of the 2010 was really good for the banks as volumes were doing well. The slowdown started in the second half, but the last six months were bad," a senior official of the State Bank of India (home loan section), who did not wish to be named, said.
This view was echoed by HDFC Bank too, which is the largest private sector home loan provider in the country.
"We have seen a steep decline in home loan deals in Delhi and Mumbai. In fact, the last four months were bad. We expected some movement post-DDA draw but not much interest has been seen. In fact, the rate hike is a further dampener," a senior HFDC Bank official said.
Interesting enough, the trend is quite opposite in the smaller cities where home loans volume have been rising.
According to realty sector experts, the unreasonable high home prices in Delhi and Mumbai are responsible for keeping the volumes low.
"The volume of home loan deals has actually gone down considerably in cities like Delhi and Mumbai. The only reason why the volume has gone down is the unreasonable home prices. In cities, such as Pune and Kolkata, where home prices are reasonable, home loan volumes are really good," Anuj Puri, chairman and country head, Jones Lang LaSalle told MAIL TODAY . There is nothing wrong with the sector, he added.
"Buyers are coming in where prices are reasonable. The trend is quite different in smaller cities where prices are reasonable. We are seeing good demands in Tier-II and Tier-III cities, where demand has seen a surge and also in cities like Pune and Kolkata, where prices are affordable," Puri explained.
However, developers blame this slowdown in offtake of home loans on inflation and the increase in lending rates.
Home loan rates have gone up by 1.75 per cent in the last six months, touching double digits.
Following the recent hike of 0.50 per cent in key rates by the Reserve Bank of India (RBI), home loan rates are expected to rise further, which could worsen the situation.
"The home loan will become more expensive. If banks decide to increase the home loan rates by 0.50 per cent, the additional cost on home buyers will be approx Rs 5,500 per lakh for 15 years," Navin M. Raheja, chairman and managing director (CMD), Raheja Developers, said.
"This will result in lower demand and low margins to developers due to high borrowing cost. In the present scenario, it is not possible to pass on the additional cost to the buyers as the prices of real estate are already under pressure since the last three to four months," Raheja added.
Home buyers have their own set of calculations.
"I am already paying EMI of an auto loan, paying rent, bearing the tuition fees of my children besides daily expenses which have gone up. So, I cannot continue paying double EMI along with rent," Pradeep Thakur, an executive with Bharti Airtel, said.
Courtesy: Mail Today 
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