SBI gears up for expected surge in affordable housing loan demand
Mumbai: State Bank of India (SBI), the country’s largest lender, is gearing up to meet an expected rise in demand for affordable home loans across India by deploying additional resources and rolling out a quick approval process, according to two senior executives of the bank.
“If you go by PMAY (Pradhan Mantri Awas Yojana) eligibility, we feel that more action is expected in smaller cities. In that direction, we are training our people across the country, on explaining the scheme and how the bank can create awareness and tap potential customers,” said Vaijinath M.G., chief general manager real estate and housing business unit.
Following the merger of five associate banks, SBI has got an opportunity to deploy additional resources in marketing and sales of home loan products, he added.
With uncertainty related to the implementation of Real Estate Regulatory Authority (RERA) Act behind it, coupled with the usual festive season demand, the bank is expecting a rise in loan demand mainly from first-time buyers, Vaijinath said.
In addition, since the interest rate subvention scheme for middle-income groups under the PMAY housing scheme is valid till 31 December, there is an added incentive for home buyers to seek loans.
Buyers are equally warming up to the idea of affordable housing with a steady increase in the sales number.
In the June quarter, the affordable segment, or properties priced below Rs25 lakh, made up around 17% of overall housing sales in eight cities including Mumbai Metropolitan Region, Delhi-National Capital Region, Ahmedabad and Chennai, according to property advisory firm Liases Foras. During the quarter, a total of 10,890 housing units in this segment were sold.
Vaijinath said that while demand from top cities account for the bulk of its home loan business, demand from smaller cities is also growing.
Cities such as Nagpur, Indore, Bhopal, Lucknow, Kanpur, Jaipur and Vizag could potentially see a rise in demand for affordable housing, said Pankaj Kapoor, managing director, Liases Foras.
He said that supply of affordable housing is mainly expected to come from government agencies rather than private builders, who tend to focus on tier-I cities and their peripheral areas.
“Even in smaller cities of the north-eastern market like Itanagar and Agartala, where we are conducting surveys, there is no builder supply but still there is a housing market where people either buy constructed houses or buy land and construct.
That’s where home loan opportunities also emerge for lenders,” he said.
Given the shortage of housing, demand is expected to be exponential for the sector, industry experts say.
SBI’s reach across the length and breadth of the country is the key differentiator, and the fact that its book is already aligned to the affordable segment gives it an edge over other lenders.
SBI’s average home loan is Rs24 lakh and its customers are mainly salaried first-time home buyers who are from the private as well as government sector. In the previous fiscal, out of the 270,000 home loans sanctioned, around 170,000 were customers with an annual income of up to Rs600,000.
This income segment is identified as economical weaker section and lower income group under PMAY, eligible for higher subsidy. This scheme is valid till 2022.
The Reserve Bank of India’s definition of affordable housing loans includes loans to individuals of up to Rs50 lakh for home units of values up to Rs65 lakh located in the six metros and Rs40 lakh for houses of values up to Rs50 lakh in other centres.
Vaijinath said that for the current fiscal, SBI is targeting around 15% growth in the home loan book in fiscal 2018. At the end of June, the home loan book stood at Rs2.88 trillion with 33% market share.
Outstanding total housing loans of the banking sector stood at Rs8.62 trillion, 11% higher year-on-year, according to the latest data from the Reserve Bank of India.
According to Krishnan Sitaraman, senior director—financial sector & structured finance, at Crisil Ltd, various government and regulatory measures coupled with underlying demand for affordable housing, are expected to continue to propel growth in the housing loan segment.
While earlier, interest rates were the deciding factor for the customer to choose a lender, now it is a host of other things such ease of dealing with the bank, no hidden charges and quality of service, Vaijinath said.
SBI claims to have home a loan average turnaround time—the period between application and disbursement—of around 11-13 days, a tad better than the industry average of a fortnight.