Home loan queries at finance firms down 7.9% in December quarter

In the case of banks, however, home loan enquiries showed a year-on-year increase of 9.3 per cent, says report

Enquiries for home loans at non-banking financial companies (NBFCs), which include housing finance companies, dropped 7.9 per cent in the quarter ended December 2018, according to a CIBIL report, showing the effect of liquidity crunch on finance companies in the wake of payment defaults by IL&FS group firms. Such enquiries had grown 45.4 per cent year-on-year in the fourth quarter of 2017.

In the case of banks, however, home loan enquiries showed a year-on-year increase of 9.3 per cent, according to the CIBIL CYQ4 2018 Industry Insights Report (IIR).

Yogendra Singh, vice-president of data science and analytics for TransUnion CIBIL, said the decline in home loan enquiries at NBFCs could largely be attributed to the supply side liquidity/ funding crunch faced by the segment. “The demand (from customers for loans) has not contracted. It is an issue of supply (of funds) when NBFCs are going through a course correction,” he said.  

The NBFC segment is expected to show a rapid recovery in home loans over the next two quarters with the reforms underway across the segment. 

This trend bodes well as NBFCs contribute significantly to driving financial inclusion and access to credit, Singh said.

NBFCs have been a significant part of overall consumer lending growth in recent years. But as the global economy slows and the non-bank financial market matures, there are early signs this sector is starting to cool.

The retail lending market is not immune to these trends and has started exhibiting deceleration. Aggregate retail lending growth in value terms (balance outstanding) has declined from 27.4 per cent in Q1 2018 to around 19 per cent in Q4 2018.

“Although we do expect continued growth amongst non-bank lenders, it is anticipated this could be at a more moderate rate. If this does happen, it will be interesting to see how this important part of the consumer credit markets adjusts, and to what extent banks step in to capture a greater share of the market,” CIBIL said.

In recent years, India has experienced a transformation of the consumer mindset from a savings-focused and debt-averse country to a more consumption-focused, leveraged economy.

The rate of change has been, and still is, significant, and is due to multiple factors: changing demographics, urbanisation, rising digitalisation and the subsequent rise of e-commerce, improved access to retail lending. Accompanying this has also been a specific increase in the proportion of short-term, smaller-sized loans – often by NBFC lenders, which include housing finance companies (HFCs), the report said.