Home loan growth at banks remained steady in Q3

Due to holiday demand, banks saw a significant increase in house loans during the third quarter of the current fiscal year. Lenders’ home loan portfolio increased by more than 15% in the preceding quarter, indicating that the demand for housing has not been affected by higher interest rates.

“Retail loans, especially house loans, do well in the third quarter because of the increased demand brought on by holidays. Families like to reserve or purchase new homes before to holidays, which is why builders start new residential projects, according to Virat Diwanji, Group President and Head of Consumer Bank at Kotak Mahindra Bank, who spoke with FE.

Real estate businesses have seen a spike in residential unit sales during the third quarter, which coincides with the holiday season. Real estate companies usually have a busy time of year around this time, launching new projects to entice consumers who often put off buying until the holidays.

According to Diwanji, owning a home is still a fundamental human need in the nation, therefore the high interest rates had little effect on the demand for home loans. The top seven Indian cities—New Delhi, Mumbai, Bengaluru, Pune, Hyderabad, Chennai, and Kolkata—saw a 31% increase in house sales year over year to reach 4,76,530 units in 2023 from 3,64,870 units in 2022, according to real estate consultancy Anarock.

In the third quarter of the current fiscal year, the house loan book of the major banks saw growth of over 15% at Kotak Mahindra Bank and Punjab National Bank, and almost 16% at ICICI Bank and Bank of Baroda. On a quarterly basis, the biggest private lender, HDFC Bank, reported 3.6%. Because of the bank’s merger with mortgage lender HDFC Ltd. last year, its growth from year to year is not comparable. The biggest lender in the nation, State Bank of India, had a 13.2% increase in its house loan book during the third quarter.

A top Bank of Baroda executive said, “Within the retail, the home loan portfolio, which is our secured book and relatively safer advance, is growing at a strong 16%.”

The central bank’s increase in repo rates has caused interest rates on house loans to grow steadily over the last two years. At 9.12%, the weighted average lending rate for house loans has surpassed 9%. In reaction to several increases in the repo rate by the Reserve Bank of India—which has increased the policy rate by 250 basis points since May 2022—banks have increased interest rates on house loans.