Interest Rates Have a Limited Role to Play in Home Sales : V. K. Sharma, LIC HFL

Growth in housing loans has slumped to a 5 month low despite banks showering buyers with attractive schemes & lower rates due to soaring real estate prices in India.

Property buyers are holding back since an over 24 % increase in house prices in the past one year is putting houses beyond their reach despite banks lowering interest rates by 1 to 1.5% points in last 4  months.

Housing loans have grown by 11.2 per ceny  year on  year in September, 2012, compared with 15.6 per cent in the same month a year ago. The growth rate is the lowest since April, 2012

Mr.  V. K. Sharma, chief Executive,  LIC Housing Finance Ltd (LIC HFL) said, "Interest rates have a limited role to play in house sales"

House prices affect sales more than interest rates. If the house price range is within the capacity of the middle class, then sales pick up. Facing slowing demand for loans from corporates, banks have been pushing retail loans, especially mortgages, since it is one of the safest forms of lending. But steep prices are stalling sales.

More than 80,000 flats remain unsold in Mumbai &  the financial capital has lost its crown as the fastest growing market. House prices rose 24.1 per cent year-on-year in the September quarter, according to RBIs (Reserve Bank of India's) house price index (HPI).T his is higher than the average 20 per cent annual increase in the previous 2 years.

Delhi, Kolkata,Chennai &  Mumbai saw the sharpest increase of 21 to 42 %.The total house loan portfolio of Indian banks is stood at Rs. 4.2 lakh crore at the end of September, 2012.

Home Loan Growth..!

Month & Year   (Growth %) 

April 2012            11.00 %

May 2012            14.60%

June 2012            15.20 %

July 2012             14.80%

August 2012         14.80%

September 2012    11.20%

Total home loan portfolio of Indian banks is stood at Rs 4.2 lakh crore

Outstanding housing loans as proportion of GDP

India 8%

China 20%

US 80%

Src: ET

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