New Delhi: Premier mortgage lender HDFC on 25 July reported a 35% fall in home loan disbursals in the first quarter of this fiscal, mirroring a 42% dip reported by its peer ICICI Bank and raising expectations that soaring interest rates and property prices would be tamed going ahead.
HDFC’s loan disbursements stood at Rs5,645 crore during the March-June 2007 period, against Rs8,713 crore in the previous quarter. ICICI Bank, the second largest mortgage lender, saw its disbursements drop to Rs4,500 crore from Rs7,700 crore.
High property prices and increased interest rates have started to eat into the coffers of home loan providers with loan disbursals by top two players taking a sharp beating in the first three months of the current fiscal, analysts said.
According to the market observers, the loan volumes have also gone down due to consumers deferring their home purchase plans on expectations for a correction in the interest rates as well as property prices.
“Customers are adopting a wait-and-watch policy on expectations that high interest rates will bring down the property prices,” real estate developer Omaxe’s Corporate Strategy and Finance CEO Arvind Parakh told PTI.
Rising interest rates have certainly added to the slowdown in the demand for the housing loan, but things could change from the current quarter as rates have been slashed for loans up to Rs20 lakh, Parakh said.
However, some analysts do not see the decline in loan volumes to lead to a fall in property prices.
“This (decline in loan disbursals) shows the cooling down impact on the demand for residential property. But this is not corresponding to reduction in the property prices,” Jones Lang LaSalle Meghraj CMD Anuj Puri said.
The demand for the residential property has slowed down, but still it is more than the supply, which has acted against any decline in the property prices, Puri added.
Domestic brokerage house Sharekhan said in a research note that ICICI Bank’s overall retail loan disbursals slowed sharply in the March-June quarter, driven by a slowdown in home loan disbursements. The home loan disbursals declined by 29% on year-over-year basis and by 42% on quarter-over-quarter basis due to higher interest rates and property prices.
HDFC’s total housing loan disbursals, however, increased by 27% on year-over-year basis in the latest quarter, the company said.