Web analysis: SBI home loans dwindle sans teasers

Sanctioned mortgages for FY12 are reported at Rs 12,500 crore, 24% lower than Rs 16,370 crore during FY11

Recent reports suggest that State Bank of India has seen a major slowdown in home loans during the recently concluded financial year (FY12). Sanctioned mortgages for the financial year are being reported at Rs 12,500 crore, which is 24 per cent lower than Rs 16,370 crore during previous fiscal FY11. The reason however seems to be the withdrawal of the special home loan product – Teaser Loans.

This slowdown is however, not reflected in the performance of other companies. The market for mortgage loans has not been so lean though interest rate tightening has had its impact. An Emkay report showed secured assets like Housing loan to have grown 11 per cent y-o-y during February 2012.

The trend in the India’s mortgage continues to be stable at almost 9.1 per cent of the GDP in FY12 (same as in FY11). This also offers opportunity for growth. The mortgage loans as percentage of GDP in India is one of the lowest in the world. The corresponding figure for China, Korea and Malaysia stand at 20 per cent-plus, while developed countries such as the US and UK see mortgage loans as 81 per cent and 88 per cent of their GDP.

The other structural growth drivers for the housing finance Industry as per analysts are demographics i.e. nuclear middle class aspiring to own a houses as well as migration of working class to high growth urban centres.

Analysts at SBI capital feel that barring a few exceptional markets such as Mumbai and the National Capital region, home affordability has increased significantly. Home inventory absorption has been robust in other cities such as Chennai Bangalore and Pune.

The leading players, HDFC and LIC Housing Finance, have seen robust growth in their business during past five years are likely to continue the same momentum. Analysts estimates peg HDFC to see to see 21 percent CAGR growth during FY12-14E. The company has seen 24 per cent CAGR growth during last five years. LIC housing finance is pegged to see 24 per cent CAGR growth over FY12-14E. The company has seen loan growth of 28 per cent CAGR during FY07-11.

It would not be right to raise the alarm bell based on SBI’s data, as it is an isolated case on account of stoppage on an aggressive loan product.