CHENNAI: Home buyers are not postponing their decision to a buy a home any more, if numbers released for the first quarter by home financiers are any indication.
Mortgage major HDFC has witnessed 23% growth in its retail home loan book during the first quarter of the %fiscal over the same period last year. "The company's growth is quite wide-spread. The demand fundamentals in the Indian real estate are now focused around cities that have sufficient economic activity, be it industrial- or service sector-driven," Renu Sud Karnad, managing director, HDFC said. Buoyed by the response, HDFC is pushing home loan offerings by sending mailers to customers to build their dream home. The communication states loan approval even before a property is selected, flexible loan repayment options, loans from any office for purchase of home anywhere in India and counselling services prior to property acquisition.
Similarly, Sundaram BNP Paribas Home Finance has seen 15% growth in its home loan book during the first quarter of 2014-15 to Rs 4,413 crore as against Rs 3,847 crore during the same period last year.
"The growth has primarily come from Karnataka and other non-south branches," Srinivas Acharya, MD, Sundaram BNP Paribas Home Finance, said.
Going forward, financiers say the real game changer and growth in the home loan book would be affordable housing segment with the push already coming in the Union Budget. Among other things, the finance minister announced an allocation of over Rs 7,000 crore towards the development of 100 smart cities, concessions on housing loans and increase in allocation under rural housing.
Against this backdrop, financiers are anticipating 20% growth in the home loans business this year over the last fiscal. "We expect the real push to come from loans under Rs 15 lakh. The main borrowers of sub-Rs 15 lakh are the LIG (low income group) and the EWS (economically weaker section) of the society," Deo Shankar Tripathi, president and CEO, DHFL (Dewan Housing Finance), said. Around 58% of the loans disbursed by the company during last fiscal was Rs 15 lakh and under. DHFL's home loan book grew 22% during the first quarter to Rs 42,800 crore as against Rs 35,100 crore. The company has opened 105 branches in the last four months.
Financiers also say that the government is pushing a credit guarantee fund scheme (a sovereign guarantee for loans of up to Rs 5 lakh, mainly targeting the low income group). "Though launched by the previous government, the new government is pushing this scheme. Senior officials from urban housing and poverty alleviation department have already had two rounds of meeting with home finance companies. The discussions revolved on creating small units with low cost technology in the peripheral areas of big cities," said a financier who did not wish to be identified.
Karnad said, "In the mid and smaller size cities, there is availability of vast land resources at lower cost. Improving demand from residents, increasing investments from NRIs, expatriates and individuals working in metros and growth in employment opportunities are the prime reasons. In some of these cities, the price has appreciated more than 10% in the past two to three years. However, they are still affordable for industrial workforce as compared to metros."
Also, with the Budget providing an income tax benefit by raising deduction against interest payment on home loan from the taxable income by Rs 50,000 to Rs 2 lakh from Rs 1.5 lakh earlier, this is expected to propel demand from the middle class for homes in Tier II and III locations.
Additionally, an increase in basic tax slab from Rs 2 lakh to Rs 2.5 lakh will increase the disposable income of an individual in that slab. "All these tax concessions will lead to considerable savings and therefore increase in one's disposable income which will lead to enhanced loan eligibility," Karnad said.
