It took the country’s largest lender State Bank of India (SBI) 10 years to scale its home loan portfolio from Rs 89,000 crore to Rs 5 trillion. Now, it is aiming to double that to Rs 10 trillion in five years, at a time when lenders — banks and housing finance companies — are locked in an intense battle to gain market share.
SBI Chairman Dinesh Khara said the bank is expecting its home loan portfolio to touch Rs 7 trillion by financial year 2023-24 (FY24), buoyed by an increased desire among youth to own homes early in life, rising incomes, and government policies like the cuts in stamp duty and subsidy.
“As competition is building up, we are also strengthening our capabilities. We are putting in place structures so that we are in a position to increase volumes and improve our delivery,” Khara said.
Home loans are the biggest portfolio in SBI’s asset book, accounting for 23 per cent as of December. Of the Rs 5 trillion, around Rs 4.86 trillion is home loans and the rest is builder finance. Also, buyouts (loans taken over from other players) are around 23 per cent of the book, but pooled assets from shadow lenders form a miniscule portion.
One of SBI’s biggest competitors in the segment is mortgage lender Housing Development Finance Corporation (HDFC). Its asset under management (AUM) was Rs 5.52 trillion as of December, without discounting the loans it has sold. Its individual loan book stood at Rs 3.51 trillion and loans to corporate bodies stood at Rs 1.24 trillion, totaling Rs 4.83 trillion.
To achieve its target of doubling the home loan book, SBI is strengthening its underwriting capability to improve delivery. Also, a new retail loan management system is being put in place that will reduce the time taken for the turnaround of loans. As of now, in the builder tie-up loan category, the bank’s turnaround time is five days, while it is 12 days for other categories in the home loan segment.
The bank is looking to use artificial intelligence (AI), Cloud, machine learning, and blockchain to propel not just the home loan business, but also other businesses. It is also looking to initiate a co-lending model for home loans to further its presence in the unorganised sector.
Referring to shifts in home purchases, Khara said, “When it comes to home loan demand, it is a function of the economy and the demographic. The younger generation is looking to own a home at a younger age. We have observed that 42 per cent of our customers are under the age of 40”.
“Going forward, we will see a much greater shift in this direction. The increase in earnings of the younger generation, their aspirations, and the concept of a nuclear family are the contributing reasons for people to aspire for homes at an early age,” Khara added.
Though credit uptake has grown at a tepid pace, the home loan segment has done exceedingly well. And, this gives an impetus to lenders to be aggressive in the segment as default rates are quite low and there is constant demand. Also, SBI’s home loan segment has a bad loan ratio of just 0.68 per cent. Furthermore, of 3.9 million borrowers who were eligible for restructuring under the Reserve Bank of India’s (RBI’s) Covid package, only 10,000 of its customers have availed the restructuring option, which amounts to Rs 2,500 crore.
The average ticket size of SBI’s home loan is around Rs 31 lakh, which has grown from Rs 25 lakh earlier. Urban, semi-urban, and rural areas constitute about 51-52 per cent of the total book, while the rest is from metros. About 72 per cent of its customer base for home loans is the salaried segment, who are well equipped to honor commitments, the bank said. Interestingly, around 60 per cent of the banks’ home loan borrowers have a minimum credit score of 750. Shares of SBI closed 0.67 per cent lower at Rs 392.05 apiece on the BSE.