Property rates zoom, home loan disbursals head down

As real estate prices head for the sky, home buyers have started pulling themselves into a cocoon. This is indicated by a decline in home loan growth with various lenders.

“We have been affected in Mumbai; the disbursals have gone down by at least 15-20% in the island city. There are concerns about realty projects in the future too. What we need to have is the right pricing and developers should understand that,” Renu Sud Karnad, joint managing director, HDFC, said on the sidelines of a Credai conference. HDFC is looking at a 22% growth in home loan disbursements next fiscal.

State Bank of India (SBI), the other leading lender in the home segment, is also busy recharting its plans for mortgage growth. “We had expected that the growth in housing loans will be Rs22,000 crore in FY11. But, so far, we have recorded a growth of about Rs11,000 crore,” said a senior SBI official.

“We feel that the target of Rs22,000 crore will not be met. This is due to the slowdown in the number of transactions due to skyrocketing real estate prices. It is not that the prices are high only in Mumbai. It is the case even in other cities,” said a senior SBI official on the condition of anonymity.

The bank is continuing its teaser home loan scheme till December 31, and will decide the fate of the product at the end of the year.

“Sales are down 45% in Mumbai and 35% in the suburbs. And these developers have repayments to make. So, by April, we expect them to cut prices if they want to survive because banks are not at all looking at refinances or easy lending,” a senior HDFC official said.

The managing director of an international property consultancy said, “These developers haven’t really learnt their lesson yet. People have seen hikes of, let’s say, at best 40% whereas prices have moved up by a minimum 35%. So how can that person buy that property? Also, there is no guarantee of these developers actually putting up the project in the stipulated time. Sales in the premium segment are negligible. If they don’t reduce prices —- and the RBI is watching with a hawk eye —- this time no one will rescue them.”

Some developers are still putting on a brave face.

“There has been a drop in sales in the island city but not in the suburbs,” said Dharmesh Jain, managing director, Nirmal Lifestyle. Abhishek Lodha, managing director, Lodha group, had earlier said that Mumbai has seen a drop of around 15% in residential sales.

Also, numbers available from the stamp duty registration office in Mumbai show that the registrations have been declining since July. October saw only 6,258 documents registered, Mumbai and its suburbs included.

“The festival season, which is the third quarter of the financial year, is the peak sales season, but this year there has been no growth in numbers, which shows that there is a need for price correction,” said an analyst at one of the bigger brokerages in the city.