Demand for home loans going Slow

Banks and housing finance companies are seeing a slackening in demand for home loans. Prospective buyers are postponing decisions on expectation that the high property prices will cool off. Further, the gradually rising interest rates are also acting as a demand dampener, say market players.

Though numbers are not forthcoming from lenders, officials from three credit information bureaus Business Line spoke to have traced a clear trend of receiving fewer home loan applications for verification from banks and HFCs (housing finance companies) in the last few months.

The slackening trend in demand for home loans is more pronounced in metros such as Mumbai and Delhi where property prices have touched unrealistic peaks, said experts.

The demand for home loans has declined in the past three months, said Mr Anil Kothuri, Executive Vice-President, Edelweiss, who heads the Retail Finance division of the company.
�Although the runaway increase in property prices has taken a breather, it has not declined. Hence, home buyers probably feel that it is worth waiting to make up their mind about buying houses, Mr Kothuri said. Edelweiss home finance currently has operations only in Mumbai.
RBI data
Data released by the RBI, until February, does not show any slowdown in month-on-month growth in the home loan portfolio, said Ms Vibha Batra, Co-Head - Financial Sector Ratings, ICRA Ltd.
However, fewer home loan enquiries may be an early indicator of a slowdown in demand for home loans; with demand slowing because of high property prices and increasing interest rates. This may get translated in RBI data by May-June as new sanctions get converted into disbursals in 30-45 days and the RBI data come with one month lag, she added.

Mr S. S. Mundra, Executive Director, Union Bank of India, agreed that there has been some slowdown in home loan demand due to high property prices. The slowdown is seen more in regions like Mumbai and Delhi than in South India. People are preferring to wait for some more time in the metros before they take a decision to purchase a house,he said.

According to Mr Monish Shah, Director, Deolitte, India housing finance companies and banks are seeing a slowdown in demand for housing loans.
�Usually the two main reasons for a slowing of demand for housing loans are property prices and interest rates. But I feel this is more to do with prices. Over the past few years realty levels have increased so much that the monthly payment is not as big a challenge as the initial capital for home buyers,� he said