Despite aggression, home loan growth for banks is slowing
Affordable housing is expected to be the next big growth driver, according to the Reserve Bank of India (RBI). It is obvious that Indian banks are leaving no stone unturned in funding the housing sector, especially affordable housing.
However, a look at the home loans given by banks under priority sector shows that the lenders haven’t been gung-ho about giving out small home loans. The share of home loans under priority sector has come down to 41% of total housing loans given by banks as of June this year from as high as 60% three years ago. Home loans up to Rs25 lakh are counted as priority sector loans.
Even as the overall lending to the priority sector has come down, the proportion given out as home loans has also decreased marginally. Essentially, the slice of home loans has gotten smaller even as the priority sector pie began shrinking. Bank credit to the priority sector grew by just 4% as of June, sharply down from 9.7% a year ago and 15.5% in fiscal year 2013.
The share of home loans has decreased to 15.2% in the overall priority sector from 17.6% three years ago.
To be fair, affordable housing has a broader definition compared with priority sector home loans. RBI includes loans up to Rs50 lakh as affordable housing loans. However, for all the aggression in home loans, the growth has been slowing since the last fiscal year. Home loans grew 11.4% as of June, down from 28% a year ago. It is evident that non-banking financial companies will continue to rule the roost in financing affordable housing.
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