Home loan biz may rise 30 - 40% during festive season

As the festive season starts bankers in Gujarat expect to witness momentum in the home loan business segment bringing back the vigour in the sluggish home loan business segment.

With majority of the banks cutting their interest rates on loan, including home loans, it is expected by the bankers that this festive season will bring growth to the sluggish home loan business in the state.

State Bank of India (SBI) that has also reduced its rates by 0.50 - 1 per cent on home loans, seem to garner business for the home loan approximately Rs 300 crore during the festive season.

H C Pattnaik, chief general manager, SBI, Gujarat said, "During the festive season we expect to garner at least Rs 100 crore every month during the next three festive months."

He further said that over the last few years, the rate of interest has risen 3 per cent that lead to an increase in the home loan rates leading to a slowing of demand for home loans.

According to Pattnaik, during the festive season, it is expected by the bankers in Gujarat to witness a growth of 30 - 40 per cent in home loan business in Gujarat as compared to the average growth rate of 15-20 per cent registered during the previous months.

During the festive season, even the builders provide discounts that are a major attraction for customers to buy homes during these periods.

A similar view was also expressed by Mohan K Lalwani, DGM & circle head (Gujarat & Rajasthan), Indian Bank, as he believes that the growth in the home loan business segment would be much higher when compared to the average growth rate.

G G Joshi, general manager, Bank of Baroda (BOB), said, "We expect to garner approximately Rs 200 crore business in the home loan segment during the festive season."

The BOB has a business target of approximately Rs 1,300 crore in the home loan segment and up until now the bank had an exposure of Rs 946 crore towards the home loan segment. Of the remaining Rs 350 crore, the bank expects to garner at least 60 per cent business during the festive season.

According to bankers, even with the government figures reflecting the easing of the inflationary pressures in the country, the ground reality remains more or less the same as the deposit rates had hardly fallen. With higher deposit rates still prevailing, the fall in the lending rates is hardly expected. Thus the money still remains dear. BOB recently reduced interest by 0.25 per cent on home loans to attract customers during the festive season.

Commenting on the sluggishness in the home loan business in Gujarat, an IDBI Bank official said, "The slowing of demand was largely associated with the expectation of the people that the rates will fall soon."

IDBI Bank too has announced a cut in the home loan rates. He further said that with no sign of the RBI softening interest rates in near future, the people for whom buying a house is a necessity or those who have postponed their purchase are now looking forward to discounts in processing fees and reduced interest rates during the festive season.

However, as some bankers are of the view that with the oil price rising, there is hardly any chance of the inflationary pressures falling. The increase in oil price has a spiraLling effect on the prices of consumer goods as well as on other sectors.

With higher inflation soon expected to return, the consumer will be hardly left with any saving in hand, leaving no other options but to go for credit financing for its house purchase.

Further there is rumour as well as expectation arising amongst the people that the RBI might go for rate cuts during the monetary policy review at the end of this month. If rate cuts are undertaken by RBI then it might further let to reduction in home loan rates.

The RBI would present the monetary policy review in India on October 31. But some of the bankers have discounted the market rumours that RBI go for rate cuts.

As many bankers believe the RBI will hold the position and would not go for rate cuts there by leaving no room for a further fall in home loans or any other loan rates.