Banks have outsmarted the housing finance companies by cornering 65 per cent of the home loan market, which grew by a whopping 76 per cent to Rs 51,673 crore (Rs 516.73 billion) last fiscal, a Federation of Indian Chambers of Commerce and Industry survey said on Tuesday.
"Banks, despite being late entrants, have overtaken the HFCs in the home loan market. The share of banks in total home loan disbursements has risen from 43.6 per cent in 2000-01 to 65.5 per cent in 2002-03," the survey carried out on 47 banks and HFCs said.
ICICI Bank and State Bank of India are the leaders in home loan segment among banks, while HDFC and LIC Housing Finance are front runners among HFCs.
According to National Housing Bank data, the total home loan extended amounted to Rs 33,841 crore (Rs 338.41 billion) last fiscal, as against Rs 14,745 crore (Rs 147.45 billion) in 2001-02.
HFCs could increase their loan disbursement to Rs 17,832 crore (Rs 178.32 billion) last fiscal from Rs 14,614 crore (Rs 146.14 billion) in 2001-02, it said.
Total loan disbursement by banks and HFCs grew by 76 per cent to Rs 51,673 crore (Rs 516.73 billion) in 2002-03. The segment grew by 31 per cent in 2001-02.
Tax rebates, falling property prices, interest rate cuts and greater amount of professionalism among builders have given a boost to the Indian housing market, the survey said.
Referring to the rate cut war, Ficci said: "The advantage banks have in terms of access to cheaper funds over HFCs has helped them in reducing interest rates on loans."
Despite high growth in home loans, Ficci said, "There still exists a vast potential that remains untapped. The mortgage-GDP ratio in India is low at 2.5 per cent as compared to developed countries where it is between 25-60 per cent."
The Ficci survey said bulk of the housing loans were in the region of Rs 5-10 lakhs with a tenure of 10-15 years.
Western region cornered the maximum 42 per cent of the home loans while Southern region had 28 per cent, North (21 per cent) and East (8.0 per cent).
The survey said that lack of long-term funds was the main constraints for the housing sector.
"The sector also continues to be hit by lack of foreclosure norms for HFCs. If it is in place, it will encourage HFCs to disburse more loans," Ficci said.
Banks and HFCs contributed to 70 per cent of the total housing finance market. The informal sector was predominant in the rural sector.
"The India Mortgage Credit Guarantee Corporation, being floated by NHB, is expected to help the HFCs to go to the informal market and reduce the margin contribution of the borrowers," it said.
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