Prepayments of outstanding home loans have reduced the growth rate of the housing finance industry.
A study of the housing finance industry by Crisil, the rating agency, which includes both housing finance companies (HFCs) and banks, says prepayments have been driven by borrowers switching loans from one agency to another and also due to aggressive marketing efforts undertaken by both banks and HFCs.
Even as housing finance disbursements grew by 54 per cent between April - December 2002, prepayments stood at 12-14 per cent of outstanding loans for HFCs, resulting in a portfolio growth of 36 per cent.
According to Crisil, the portfolio would have grown by 43 per cent were it not for these prepayments. Disbursements to the housing sector grew by 54 per cent to nearly Rs 31,000 crore for the period ended December, 2002.
According to Crisil, banks have not faced significant prepayments in this period and the prepayment levels of the HFCs
