Money lending scenario in Indian banks – home is where the money is !
New Delhi : Money lending scenario in Indian banking industry, which has been witnessing a slow momentum from the corporate clientele is showing a trend of pick up, as demand for home loans are nudging a tad higher and building up expectations for Indian banks to strengthen mortgage lending in home-sector. With India’s banks, struggling to boost mainstay corporate loans, the emerging home loan datasheet suggests of a fillip in the home-buying spree, especially in the second tier towns that has driven mortgage-loan growth to the fastest rate in at least six years.
Top lender State Bank of India (SBI and Co.), and two big private sector giants – ICICI Bank and Axis Bank sound optimistic on grounds that smaller cities and such home-demand centres in the country have contributed towards a swell in overall home-loans books. Data supports the claim as outstanding home loans in India stood at $103 billion as at end-November.
This scenario is an outcome of banks adopting a well-planned strategy — wherein, attention and focus has shifted from corporate clients to private customers (read individuals). This change of focus has found strategic alliance between the lenders (banks) and the borrowers (individuals), and has helped in building back on the eroded base, vacuumed by corporate disinterest.
Banks, having base in Indian soil, are focusing on lending to individuals to counter a sluggish corporate-loan market that has been hit by a three-year long slowdown in Asia’s third-largest economy. Advantage — many. To begin with — One — lending is on, albeit decreasing corporate demand. Two — low number of defaulters, as Home loans more often than not, present lower bad-debt risks for the banks than corporate loans, as supported by data. Third — Tier-2 cities which are picking up and walking hand-in-hand along with infrastructure growth story, enable banks to expand laterally on their loan-lending books, without having to shell out very high amount per client, as tier-2 cities comparably are more affordable for investment vis-a-vis biggies in the likes of metros and A-class cities.
SBI alone expects an 18 percent growth in home loans for this fiscal year ending in March, against 14 percent growth for overall credit. According to CGM (Chief General Manager, real estate lending) of SBI, Jayanthy Laxmi — Tier 2 cities are picking up…Connectivity, affordability and rising employment are helping them to grow faster.
Infrastructure is atan overall high on expectations, as rising income levels, increasing urbanization, lower mortgage interest rates over the past year and easier capital regulations for loans to mid-segment home buyers are driving demand for housing units in India. Analysts are ready to bet on numbers, and projections are brimming with optimism. Some forecast that India would need 110 million new houses by 2022, thanks to PM Modi’s ‘housing for all’ vision. Banks too are filling the hope-pit and supporting it with data, as central bank data shows housing loans during April-November grew 12.2 percent, their fastest pace in at least six years, and accounted for nearly a third of total loans made. By comparison, credit to industry, which includes corporate loans, was up just 0.4 percent.