The disbursal of affordable housing loans has witnessed a slowdown, largely due to repeated repo rate hikes, according to the State Bank of India’s economic research department’s (ERD) report Ecowrap.

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As highlighted in the research report, on average the proportion of home loans up to Rs 30 lakhs in total loans disbursed has declined to 45 per cent during Jan-Feb’23, from around 60 per cent of the total disbursals in June 2022 quarter. On the contrary, for the loan amount of Rs 50 lakh, their share has increased from 15 per cent to around 25 per cent of the fresh housing loans during this fiscal.

“This indicates that the demand for housing loans by people at the lower end of the strata, who take loans for the affordable housing sector, has been noticeably hit,” said Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI.

The report also pointed out that linking of home loans with an external benchmark or repo rate has led to removal of the differential interest rate for borrowers who are taking home loans of Rs 30 lakhs and below. In principle, to ensure immediate transmission as per RBI norms, home loans of lower amount are offered interest rates linked to External Benchmark based Lending Rate (EBLR). This, in turn, could possibly explain the decline in home loans at the lower bracket as rates have significantly increased within a short span of time with the RBI frontloading the rates.

As per the ERD analysis, of around 55 lakh EBLR-linked home loan accounts, about 47 lakh customers’ Rs 8-lakh crore outstanding witnessed increase in tenure, EMI or both.

“It is estimated that the interest cost on home loan borrowers might have increased more than Rs 20,000 crore,” asserted Ghosh in the report.

 

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