Housing loans down on higher interest, property prices: National Housing Bank

There has been a slowdown in the growth of housing loans with higher interest rates and rising property prices taking homes out of the reach of the middle-class, According to National Housing Bank (NHB) chairman and managing director (CMD) RV Verma, housing loans growth has slowed down as higher interest rates and rising property prices have pushed homes beyond the reach of the middle-class.

"During the four years prior to the 2008 crisis, the housing loan portfolio for housing finance companies grew 25 per cent. In 2009-10, it grew by 19 per cent and in 2010-11 it slowed to 16 per cent when Rs 62,000 crore was disbursed," Verma told journalists on the sidelines of the 26th Skoch summit in Mumbai.

Pointing out that even in 2009-10 when the economic recovery had begun, the growth in home loans was about 19 per cent which has now fallen to 16 per cent making it quite evident that there was a slowdown. He added that rising interest rates coupled with the surge in property prices had dented loan demand.

Verma said that he was already getting reports of inventory pile-up in the real estate sector and added that demand would fall, even further if interest rates continued to be hiked. The Reserve Bank of India (RBI) hiked key interest rates for the ninth time since March 2010 with a sharp 0.5 per cent in May this year, to come to grips with inflation. This has led to commercial banks hiking interest rates on home and car loans.

According to Verma, NHB raised its prime lending rates to 10.5 per cent from 10.25 per cent three months ago and had no plans for further rate hikes. He added that NHB, functions as a regulator for housing finance companies, providing such firms with refinance facilities, had disbursed nearly Rs12,000 crore as of now.

Responding to a query as to whether NHB planned to sell its stake in Mahindra Rural Housing Finance, Verma denied the existence of any such plan at present. He added that the company would stick to the investment. NHB holds a 12.5 per cent stake in Mahindra group company, Mahindra Rural Housing Finance Ltd (Mahindra Home Finance).