The market share of banks in the housing finance industry is expected to decline post 2004-05. This will follow as most public sector banks would largely focus on corporate advances and access the securitisation market to build their retail loan books, as stated in a retail finance report brought out by Cris Infac, a subsidiary of Crisil.
The housing finance industry will need incremental funds to the tune of Rs 140,000 crore over the next five years, of which about Rs 44,000 crore will come from the banking sector. This is based on expectations of a 24.1 per cent growth rate in terms of incremental direct disbursement, stated Cris Infac.
Currently, banks have garnered a 34.8 per cent share of the housing finance market by offering competitive rates of interest. According to the study done by Cris Infac, banks share of incremental retail disbursement will increase to 43 per cent by 2004-05, but thereafter will decline.
The report forecasts a likely disbursement by banks of around Rs 44,000 crore in 2006-07, marginally above the estimated incremental funds available in the banking system for all priority sector lending excluding the farming sector.
A significant portion of the growth in disbursement follows the pre-payment of loans to take advantage of the falling interest rates.
