Banks say that home loans are a safe bet and this is the only segment growing in double digits. Demand has been triggered because of work from home (WFH) needs, discounts by builders, reduction in stamp duty rates and interest rates being at an all-time low. The frequent changes in pricing among lenders seem to indicate that a rate war is brewing as the banks compete to grow the home loan book, which is seen as the safest category of loans.
In the last few days, Bank of Baroda and Union Bank of India had slashed their home loans to 6.8% and 6.9%. SBI recently announced discounts of up to 25bps on loans above Rs 75 lakh for customers applying from its app Yono. HDFC also offers loans at 6.9%.
Speaking to TOI, Kotak Bank group president (consumer banking) Shanti Ekambaram said that the lender was seeing an increase in demand for housing as the shift to WFH had resulted in homeowners looking for larger accommodation. Also, developers and state governments were offering additional incentives to home buyers.
“We are seeing demand back at pre-Covid levels and we want to open our doors to home loan customers as part of our acquisition strategy for long-term customers,” she said. According to Ekambaram, home loans were the best asset class, and offering the lowest rate enabled the bank to attract top quality customers.
While announcing the results, Punjab National Bank MD & CEO S S Mallikarjuna Rao said that home loans have gained momentum and are heading to pre-Covid levels. Home loans have been a major driver of credit, growing nearly 10% on a year-on-year basis to Rs 84,000 crore.
For HDFC, home loan disbursements in October 2020 have been the second-highest in any month in the institution’s history. Mumbai saw the highest demand followed by Delhi and Bengaluru, while Hyderabad and Chennai were a bit slow. “The demand that we are seeing is largely transactions that were initiated post-Covid and is not pent-up demand. We hope that this will be sustained,” said HDFC VC and CEO Keki Mistry.
Ekambaram says that the renewed demand for housing is an opportunity for Kotak Bank, which was not part of the top-five home loan lenders. The bank now offers home loans at 6.75% for salaried borrowers with a Cibil score of over 750 and loan-to-value of 80% and below. For self-employed borrowers, the rate is 6.85%, all other conditions being similar. The same rates will be available for borrowers seeking balance transfers.