Home loan growth flat in February

Home loan growth in February was flat sequentially as sales of property slowed down and high prices turned away buyers.
Banks lent 15.2% more this February compared with the last, data from the Reserve Bank of India (RBI) and Morgan Stanley show. That’s just like in January, when the year on year growth was 15.1%.

But it’s more than the 13.2% growth notched up in December.
Non-food credit growth in the banking sector stood at 22.8% as of February end, compared with 23% in January, according to RBI data.

Maneesh Srivastava, chief executive officer of Muthoot Housing Finance Company, said there are three reasons why sales of property were impacted: high real estate prices, high interest rates and people waiting and watching in the hope prices will correct.
Lenders find business in Mumbai the most slack. “That’s because,” said Anil Kothuri, executive vice president, Edelweiss Finance & Investments, “real estate transactions have come down by 25% compared with last year. Property prices have jumped up 40% in Mumbai in the last one year.”

State Bank of India (SBI), India’s largest lender, told DNA Money a fortnight back that its home loan advances growth in fiscal 2011 will be a shade lesser than the year before.    

“Growth has been impacted due to high real estate prices and high interest rates,” a top SBI official had said.

Clyton Fernandes, banking analyst at Anand Rathi Financial Services, said SBI had pushed growth very strongly last year due to which there is also a high base effect that will come into play.
Analysts are of the view that high real estate prices are the biggest problem followed by interest rates.

Due to this, banks and non-banking finance companies (NBFCs) are focussing on substitute lending.

Kothuri said they are opting for loans against property to offset the fall in mortages.

But some analysts say growth in housing loans, which occupy the largest chunk of retail lending for banks, will rebound as prices correct.

“Housing loan demand will return. There could be some stagnation for a few months, but in the long-term it shall grow,” said Vaibhav Agrawal, vice president (research), Angel Broking.ministry has proposed to allow major ports set their own tariffs to make them compete against private counterparts.
But competitive tariffs will be a challenge for the major ports owned by the government because of their employee cost and equipment-related issues.

At present, Tariff Authority for Major Ports (TAMP) is the regulator which sets the upper ceiling of rates that can be charged by all major ports in India.

But a policy change has meant TAMP will soon cease to exist and ports will be free to set their own tariffs.

The refrain among more than half a dozen port officials that DNA  spoke to was tariffs will have to rise in the short term.

“Expenses and staff costs are extremely high for these ports. Provident fund, gratuity and medical expenses for retired employees form a chunk of their expenditure. So they are constrained from having competitive tariffs,” said a top official from a private port who formerly handled some of India’s major ports.

“Under TAMP we could not increase tariffs, whereas all other costs have risen in the last few years. Fuel prices, an important component in port operations, are up significantly, as are employee costs. Tariffs need to be increased accordingly,” said a senior official with the Jawaharlal Nehru Port Trust, who did not wish to be named.

An official from Vishakapatnam port concurred, saying “there’s no question of a reduction in tariffs to be competitive”.

A Mumbai Port Trust official pointed out that the last tariff revision happened in 2005. “So an increase in tariffs is an imperative, irrespective of the new policy. Even if TAMP continues, a wage revision makes sense to factor in inflation and other factors for the last five years,” the official said.

“But the flipside to that is raising tariffs may mean losing volumes to private ports. India’s major ports are already lagging in efficiency and equipment. Competitive tariffs are the only way out to attract customers,” he said.