Demand for home loans has declined, says SBI

The State Bank of India (SBI) is set to post a decline in year-on-year growth in home loans in the current fiscal, according to a top official of the bank, who did not wish to be named.

India’s largest lender had recorded a year-on-year growth of 32% in home loan advances last fiscal, at Rs71,193 crore.

“Our home loan advances growth will be a shade lower than last year. The drop is because demand for home loans has come down. Inflation has impacted the demand. High real estate prices and rising interest rates are also responsible for bringing down the demand of home loans,” said an SBI official who did not wish to be named.

But experts said the change in pricing of home loans is an important factor due to which the home loans growth got impacted.

“The Rs17,130 crore growth which was witnessed last financial year was due to its very popular teaser scheme under which the bank was charging a fixed interest rate for the first few years of re-payment. Now that the pricing structure has been changed, the scheme is no longer attractive,” said Harsh Roongta, chief executive officer, Apnapaisa.com, a personal finance advisory.

Nitin Kumar, deputy vice president, Quant Broking, concurs. “Now SBI home loans are linked to the base rate. That is perhaps the reason growth is dipping.”
 
Till December 31 last year, the SBI was offering teaser loans where the interest rate was 8% for the first year, 9% for the second and third years, and a floating rate thereafter. As on that date, the total outstanding retail home loans stood at Rs82,376 crore for the bank.

But from January 1, the interest rates on home loans were linked to the base rate which currently stands at 8.25%. In the current quarter SBI has hiked the base rate twice. Customers availing of home loans were still getting a concession in interest rates in the initial years of repayment.

But now the rates were slightly higher.

Beginning January 1, SBI has been charging an interest rate of base rate plus 1.50% (9.75%) for loans up to Rs30 lakh and base rate plus 1.75% (10%) for loans above Rs30 lakh and up to Rs75 lakh.

But till March 31, there is a concession in interest rates.

Accordingly, customers can avail of loans up to Rs30 lakh at a discount of 1% in the first year (8.75%) and 0.25% for the second and third year (9.50%).

Similarly, for loans above Rs30 lakh and up to Rs75 lakh, the discount will be 1.25% in the first year (8.75%) and 0.50% in the second and third year (9.50%).