HDFC pulls closer in home loan race

State Bank of India (SBI), the largest lender in the country, was able to maintain a bigger retail home loan portfolio than close rival Housing Development Finance Corporation (HDFC) last fiscal.

In terms of year-on-year growth, however, HDFC ran ahead.
At the end of March, SBI’s retail home loan portfolio stood at Rs86,769 crore, up 22% from a year ago, while HDFC’s was up 27% at Rs85,649 crore.

Analysts feel SBI is unlikely to sustain the growth in its home
loan portfolio and will soon surrender market leadership to HDFC, unless it prices its home loans below the rival’s.   
 
“We expect loan growth to be in line with the industry. It won’t go above industry levels, but it won’t fall either,” said Vaibhav Agarwal, vice-president (research), Angel Broking.

“The home loan market, as such, is seeing a slowdown. Moreover, SBI has raised interest rates. This will affect its portfolio. We don’t think it (SBI) will be able to sustain the growth that it has shown in the past,” said an analyst with a Mumbai-based research house.

Currently, SBI and HDFC have priced their home loans at the same level. Housing loans up to Rs30 lakh are charged a floating rate interest of 10.25% per annum, loans above Rs30 lakh and up to Rs75 lakh at 10.50% per annum and loans above Rs75 lakh at 11% per annum.

According to Suresh Sadagopan, who runs Ladder 7 Financial Advisory Services, HDCF will soon catch up with SBI in retail home loan portfolio unless the latter prices its loans cheaper. “SBI might have a higher reach, but look at the paper work involved in taking a home loan from them. They got a higher portfolio only because of their teaser scheme.”

SBI has discontinued the teaser scheme beginning this month. The highly successful scheme helped SBI —- ‘the banker to every Indian’ as its tagline claims —- take an impressive lead in the home loans market. At the end of December 31, 2010, the retail home loan portfolio stood at Rs82,376 crore for SBI, around 11% higher than HDFC’s Rs74,155 crore.