Tuesday, July 31, 2007

Disbursement of home loans fall

Hindu reports

High property prices and rising interest rates appear to have lowered the demand for home loans, with the country’s top two lenders in this category recording a fall in disbursements during the first quarter of this fiscal compared to the January-March quarter.

HDFC and ICICI Bank together disbursed about Rs.10,000 crore in home loans in the April-June quarter this year, down from over Rs.16,000 crore in the previous quarter.

Market leader HDFC recorded a 35 per cent plunge in home loan disbursements at Rs.5,645 crore during the quarter ending June 30, 2007, from Rs.8,713 crore in the period January-March 2006-07.

ICICI Bank, the second-largest mortgage lender, saw a sharper erosion of 42 per cent sequentially in home loan disbursal during the quarter. Disbursements dropped to about Rs.4,500 crore in the quarter ended June 30 from over Rs.7,700 crore in the previous quarter.

Although home loan disbursements fell sequentially, HDFC recorded a rise in the amount when compared to Rs.4,386 crore in the first quarter of 2006-07. On the other hand, ICICI Bank’s home loan disbursements fell 29 per cent during April-June 2007 compared to the first quarter of the last financial year.

According to market observers, loan volumes declined as consumers deferred their home purchase plans on expectations of a correction in interest rates as well as property prices.

The Reserve Bank has increased key interest rates six times in the last year-and-a-half to check credit demand and keep inflation under check. This had prompted most banks to increase interest rates on home loans.

“Customers are adopting a wait-and-watch policy on expectations that high interest rates will bring down the property prices,” real estate developer Omaxe’s Corporate Strategy and Finance CEO Arvind Parakh sai

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