Breaking News

Banks’ home loanbusiness falls drastically

Banks exposure to housing sector in Goa fell drastically in 2018-19, as advances to home buyers shrunk due to poor demand, reports Shoma Patnaik

Reflecting the slowdown in demand for real estate in the state, home loan portfolio of banks is fallen badly. This is revealed in the latest data on bank lending during the year 2018-19 which shows no takers for loans by home buyers.

In 2018-19 banks in Goa managed to disburse only Rs 260.8 crore of housing loans vis-à-vis Rs 1025.5 crore disbursed in the previous year 2017-18. It is a sharp fall indicating the gloom in the local real estate industry.

For some months now bankers in the state have been complaining of difficulty in meeting their lending targets for home loans. And the latest information as revealed in the state level bankers committee (SLBC) data is a sign of the slump. 

Bankers are hopeful of revival in housing demand in the current year 2019-20. Yet taking stock of the situation they have wisely set the target for housing loans slightly lower in the current year. The target for housing loans by all banks in the state is Rs 1132 crore in 2019-20, compared to the target of Rs 1135.6 in 2018-19, according to the annual credit plan.

Interest rates are on the downtrend presently with the Reserve Bank of India (RBI) steadily lowering the repo rate during periodic reviews of the monetary policy. This is good news for borrowers as bank lending rates are also climbing down.

On June 6, the RBI cut the repo rate again by 25 basis points. Post the cut the repo rate currently stands at 5.75 per cent from six per cent. The RBI is asked banks to pass on the rate cut to customers and make consumer loans, auto loans as well as all loans cheaper. It means that, EMIs are likely to come down assuming that banks pay heed to the RBI.

So far banks have transmitted the repo rate cuts slowly with marginal reduction in lending rates and that too by only few banks.   After the June 6 rate cut, banks have indicated unwillingness to lower interest rates further saying that, it is not possible to bring down the cost of funds without reducing deposit rates. 

Meanwhile, bank officials in Goa doubt whether lowering interest rate on home loans will revive demand for housing loans. Consumer sentiment in the housing sector is sluggish in the state thanks to slump in the economy, feel bankers. “With construction companies from other states heading to Goa and creating a rash of housing complexes there are several unsold properties. Builders have inventory on their hands,” disclosed a Panaji based branch manager.  

The slump in Goa’s housing market is in line with the all-India trend. Builders across states are crying recession. To revive the housing industry, the government has implemented several measures. These include legislation such as RERA to improve consumer confidence in builders, lower GST rates and tax concessions. The Union Budget on July 1 is also likely to have positive proposals for the construction and housing industry.

Home loans are a part of priority sector lending for banks for which targets are set by NABARD in the annual credit plan. To revive the segment, local branches are conducting loan meals and housing expos frequently.  

Check Also

Mess in the making or clean-up act?

By Shivanand Pandit Corporate governance in the banking sector is in the limelight because of …