Housing loan customers shifting loyalty on the rise

With competition to woo home loan customers by offering better interest rate and other benefits on the rise among the banks, more and more customers are shifting their loyalty.

Around 50 per cent of the in-principle home loan sanctions accorded last week pertains to takeover of loans from other banks or housing finance companies, according to a senior official of State Bank of India. Bulk takeover of home loans of those employed in multi-national firms is also on the rise.

“It is only natural that people opt for those offering lower rate of interest,” says chartered accountant V.Dasaraty. “The shift will be more in the days to come as the interest rate reduces.”

High interest

According to V.Anandakumar, who recently applied for takeover of his home loan by Canara Bank, “the high interest rate charged by the bank with which I have the account is the reason for my decision.”

“We are encouraging takeover of home loans,” says an official of the Canara Bank branch where Dr. Anandakumar wants to shift his home loan. He says he was not guided properly three years ago by the builder, resulting in his getting stuck to a loan at high rate of interest.

An official of Union Bank of India says customers of some HFCs have been affected by high interest rates and hidden charges. Such customers are coming in large numbers seeking details of the benefits of switching their home loan. More than 10 per cent of the sanctions are takeovers. The trend will increase significantly in the coming days, the official adds.

“Normally, takeover of home loans constitute around one per cent of the total home loan sanctions in a particular period,” says Mathew Joseph, Senior General Manager, Housing Development Finance Corporation.

Takeovers

Indian Bank says around 12 per cent of its home loans disbursed is for takeovers. A chunk of the takeovers are for customers of home loan of more than Rs.20 lakh, according to sources in the bank.

In the backdrop of the economic slowdown, many households that have obtained home loans are looking at options of better financial prudence by switching over to banks and institutions charging less interest.

Some banks have started to aggressively market home loans since it constitutes a significant part of the retail loans. SBI made a spate of interest rate cuts in home loans in recent weeks. It has been aggressively marketing its home loan products by stating that the takeover of an existing home loan of Rs.30 lakh with an original tenure of 15 years can provide the customer savings around Rs.5,99,918 in the entire loan tenure.

30% increase

There is an increase of 30 per cent in the number of actual sanctions of home loans in the city in 2008-2009 as compared that during 2007-2008, the official says. One of the factors contributing to the growth is the increase in number of takeover of home loans. The recent increase in low-cost CASA deposits in many public sector banks because of the fear among people of a financial meltdown has helped them turn aggressive on marketing of home loans with more takeovers.

Courtesy : The Hindu dated 19/02/2009

Over 1 lakh visited property fair

CHENNAI: FAIRPRO’09, the property fair organised by the Confederation of Real Estate Developers’ Associations of India-Tamil Nadu, witnessed over one lakh footfalls and hundreds of bookings over the three days of the event.

Announcing this at a press meet here on Sunday, exhibition cairman Sandeep Mehta told press persons that the response to FAIRPRO’09 was considerably better than the annual exhibition witnessed last year.

One of the reasons for this was that “the price of prime properties was reduced considerably. There was very good response,” explained Prakash Challa, President of the Confederation of Real Estate Developers’ Associations of India-Tamil Nadu.

For instance, property, previously priced at Rs.3,000 per sq ft, was marketed at around Rs.2,300 per sq ft, he said.

Home loans

“The average ticket size of the home loans sanctioned was Rs.25 lakh,” said V.G.Kannan, General Manager, State Bank of India.

One of the factors that helped in an increase in the number of home loan seekers was the bank’s new home loan scheme at 8 per cent interest, he said.

SBI said the bank had provided in-principle sanction for home loan totalling Rs.83.56 crore during the three days.

Other housing finance companies and banks such as Housing Development Finance Corporation (HDFC), AXIS Bank and LIC Housing Finance reported an increase in the number of enquiries for home loans.

“We are processing the applications as many of the applicants have not provided the necessary documents. There will be an increase in the number of home loan sanctions in a few weeks,” said Mathew Joseph, Senior General Manager of HDFC.

With a high footfall, a good rate of conversion would make the fair hugely successful, said G.R.Sairaj, Manager, Retail Asset Centre, AXIS Bank.

Courtesy: The Hindu dated 16/02/2009

Affordable Housing

The present day mantra of affordable housing has different versions of definitions. One of the most practical definition of affordable housing , which I came across was   “making housing  at a reasonable size with reasonable facilities at a reasonable distance from the CBD at  an  affordable Price” for  the middle class segment.

It does’nt make any sense for the market or the customers ,If the developer announces a project in the following line and call it as  Affordable housing:

1)Announcing a project where public transportation is a problem or only the occupants have to use only their own transportation.

2)The size of the apartment is reduced, where as the price remains the same as present market level.

3)Reduce the base price and apply add ons.

4)Charging the current fancy charges for the car parking – note, half of the occupants may not have cars.

5)Proposing a hefty monthly maintenance charges.

6)Avoiding essential infrastructure in the project in the name of cost cutting- for eg. Proposing a G + 3 structures and not providing the lift or DG back-up for the lift.

Not necessary items in affordable housing projects:

1)lavish landscapes.

2)High end finishing materials.

3)More numbers of Closed parking slots – if it is a compounded development.

4)More number of three bed room units (advisable to have more number of two bed rooms and less number of single and triple bedrooms units).

5)Facilities like, Swimming pool, health clubs – even chargeable.

Rajesh Babu – Chief consultant Roofbird.com – 21st of January.

Boosting home loan market realty check

As the impact of the global recession hits the realty sector hard, public sector banks have taken initiatives to boost home loan disbursements in and around the city.

The State Bank of India recently gave in-principle sanction to hundreds of new home loans worth several crore rupees at the property fair it organised in Chennai recently. With a better focus on customers, the property fair had a number of enthusiastic participants. Most of the customers of home loans were in the order of Rs.25 lakh and above. “The number of home loans to buy property within the city limits was very small,” said an official of SBI.

Most of the home loans customers sought loans for buying property in the outlying areas of the city, the official added.

As a dull housing sector affects around 200 industries manufacturing various products, the public sector banks have taken the initiative of helping the housing sector by boosting the home loans, said an official of SBI.

However, senior executives of some private sector banks said that they had been adopting a cautious and relatively reluctant approach as they expected the housing market to stabilise after a possible correction.

These banks are marketing home loans only to the target groups with more stringent norms as the home loans are crucial in the growth of the retail credit segment. “The public sector banks have turned more aggressive in marketing the home loan products. This has actually created interest among the customers,” said P.Ravindra Kumar, Senior Manager –Marketing, DLF Southern Homes.

The interest rate, period of processing of home loan and the customer oriented services of the bank will determine the positive outcome of such initiatives, he added.

“We are trying to sell the home loan products to the existing client base with relatively aggressive marketing as housing loan is a good segment,” an official of Corporation Bank said.

Builders expressed optimism.

However, they said they would have to wait as the people were delaying the decisions with the issue of job security dominating the minds of many customers.

Courtesy: The Hindu dated 22/01/2009

LIC Housing posts 27% rise in Q3 net

LIC Housing Finance Ltd reported a 27-per cent increase in net profit to Rs 134.33 crore in the quarter ended December 31, 2008, as against Rs 106.02 crore in the corresponding year ago period.

“Though the third quarter was difficult, we have reported a decent growth in net profit. Healthy disbursements, improved operational efficiency and reduction in non-performing assets have helped us achieve good results”, said Mr R. R Nair, Chief Executive, LIC Housing Finance.

The net interest margin increased to 3.23 per cent as on December 31, 2008 (2.86 per cent as on December 31, 2007). Disbursements in the third quarter, at Rs 1,944 crore, rose by 26 per cent as compared to the year ago period. Sequentially also, the disbursements increased by 18 per cent.

“Because of our pan-India presence, we were able to tide over the challenging quarter. Though some pockets such as Mumbai and Bangalore saw a slowdown in demand, there has been a good growth in disbursements in other centres”, Mr Nair said.

Loan size up

In the reporting financial year, LICHF’s average loan size has increased to more than Rs 13 lakh as compared to around Rs 10.6 lakh last year. Net NPAs as on December 31, 2008, fell to 0.73 per cent (1.61 per cent).

Courtesy: The Business Line dated 21/01/2009

Realty brokers need to be trained: Mohan

THE deputy governor of the Reserve Bank of India (RBI), Rakesh Mohan, has suggested that steps should be taken to issue licence to and train real estate brokers.

Speaking at a workshop on housing organised by National Housing Bank (NHB) in the capital, Mohan said that the move would be an important step towards building an organised property market in the country. “In countries such as the US, property dealers have precise knowledge about various taxes across all areas. We do not have such a system at present and it is worth emulating the pattern followed in the US. Accordingly, we need to license and train property dealers,” he said.

Mohan further said, “The transaction cost, which includes stamp duty and brokers fees among others, constitutes roughly 10 per cent of the total cost of buying a property. With enhanced efficiency, this could be brought down to 6-7 per cent.” Mohan said that pricing of assets such as housing has been attracting greater attention of regulators after the US sub-prime crisis led to turbulence in the financial sector. “When the housing sector grows as a proportion of the economy, monetary policy has to be conscious. We have seen how the global financial sector has been impacted by the housing sector crisis in the US and Europe,” Mohan said.

Courtesy:Finance Chronicle dated 20/01/2009

TN clocks average growth in realty sales

Despite the slowdown witnessed by the realty sector, Tamil Nadu has registered an over 15 per cent growth in revenues from stamp duty and registration charges between April and November 2008.

While the state recorded an overall growth in revenues from this segment, revenues from Chennai dropped during the same period.

“For the eight-month period between April and November, 2008, the state’s revenues from stamp duty and registration charges stood at over Rs 3,000 crore against Rs 2,600 crore during the corresponding period of 2007 ,” a senior state government official told Financial Chronicle on condition of anonymity. “Had the real estate boom continued, we could have earned much higher revenues,” he added. Even though the state registered an overall growth of over 15 per cent, the earnings on this account from Chennai city dropped by around 3.5 per cent. “While Chennai contributed Rs 1,350 crore during April-November 2007, it contributed only Rs 1,300 crore during in 2008,” the official added.

Despite the drop in revenues, Chennai seems to have contributed 45 per cent of the state’s revenues from registration and stamp duty during the period in the current year. And it was 50 per cent last year, indicating that property prices are skewed in favour of the city.

Rajesh Babu, chief executive of RECS Group, a Chennai-based property advisory, gave the reasons for the differential growth between Chennai and the rest of Tamil Nadu. “While those in Metroes, who are well aware of other investment options such as shares, mutual funds and insurance products, may have been quick to move funds elsewhere during turbulence, most others still bank on land for investment growth in other parts of the state,” he said.

He further pointed out, had the boom in realty sector continued, revenues for the state could have doubled. “In the present scenario, it is always the metros that first take the impact and there will be a time lag for this to hit other parts of the state,” he added.

Prakash Challa, president – Credai – TN chapter, felt that since the real downturn started somewhere in the middle of 2008, one has to see the overall revenues on this front for the whole of 2008-09, before assessing it.

Courtesy: Finance Chronicle dated 12/01/2009

Housing demand may pick up from April

After a slump in the sector in 2008,home buyers can expect more affordable houses at reasonable interest rates in 2009

Home, which is often considered as the most secure investment a person could make, is increasingly being considered a priority sector by the government. Come 2009, the residential vertical of the real estate sector will gather steam from April-May, according to developers, bankers and property consultants.

“A home buyer is getting properties at 2006-07 price,” said Hemant Shah, chairman of Akruti City, a Bombay Stock Exchange-listed real estate development company. “There is a correction of 20-30 per cent in the residential sector. Developers are doing everything to bring down the price for the common man. But people should be very careful when they decide to buy a house. They should go in for a reputed developer and also check if the developer has got a financial closure in place before agreeing to buy the property.”

Home buyers can expect more affordable and cheaper homes in 2009, adds Rajeev Talwar, DLF’s executive director. “Hopefully people can have loans at reasonable interest rates,” he said.

Banks say they expect property prices to correct anywhere from 15 per cent to 25 per cent depending on the town and the location across the country.

“However, what is equally important is the availability of ‘No-frills affordable houses’ for which there is a huge demand,” said Renu Sud Karnad, joint managing director HDFC. “The developers have realised this and are taking up projects to cater to this demand. The recent measures initiated by the government on the monetary and fiscal front have been very encouraging and have helped tide over the difficult liquidity conditions. However, a lot more needs to be done so that bank credit starts to flow to the real estate sector and other financial intermediaries. We have started to witness some good signs on this front. In addition, with oil price around $40 and with inflation easing rapidly, interest rates are likely to head lower and this should augur well for all connected to the housing sector.”

Nandan Srivastava, general manager, Bank of Baroda, agrees. “The common man should hope for an overall improvement in the economy and that growth comes back to 8 per cent-9 per cent levels,” he said. “They should also hope that rates stabilise and liquidity comes back to market, which will improve sentiments. We should also hope that the employment uncertainties go away.”

Courtesy: Finance Chronicle dated 07/01/2009

LICHF eyes Rs 10,000-cr loan disbursement

LIC Housing Finance has so far approved home loans worth over Rs 5,500 Crore

LIC Housing Finance (LICHF) is planning to disburse Rs 10,000 Crore in loan this financial year, up from the Rs 7,100 Crore last year. “During the last financial year, we disbursed loans worth Rs 7,100 Crore and our annual target for this year is Rs 10,000 Crore,” LIC Housing Finance director and chief executive R R Nair said.

LIC Housing Finance, a fully owned subsidiary of the Life Insurance Corporation of India (LIC), has so far approved over Rs 5,500 Crore and already disbursed around Rs 4,500 Crore, Nair said. The company also expects to bring down its non-performing assets (NPA) by the end of this financial year, he said.

“We have been maintaining our NPAs year after year. Last year, it was 1.7 (gross) and a net of 0.63.

This year we expect it to come down to at least 1.6,” he said. Referring to the slowdown in the real estate sector, he said the company was not facing any problem.

He added that there might be a slowdown for builders targeting investors or speculators. I don’t think there is slowness for those who are focusing on genuine end-users,” he said.

“We have been operating in the end-user segment and so, we have not experienced any slowdown,” he said adding that the end-user segment had a vast potential due to a demand supply gap of 27 million dwelling units in the country. “We have a growth rate of 30 per cent plus compared with corresponding period last year. This growth rate is considered to be decent in the current scenario,” Nair said.

Courtesy: Finance Chronicle dated 29/12/2008

Repco Home Finance to cut lending rates

STATE-RUN Repco Home Finance (RHFL), majority owned by Repco Bank, would be cutting its prime lending rate by 25 to 50 basis points in January, a top official said.

“With the benchmark interest rates set to go down further, we would be cutting our prime lending rate by 0.25 per cent to 0.50 per cent from the present 12 per cent by end of January,” S V Balasubramanian, executive director of Repco Home Finance told Financial Chronicle.

RHFL, which started in 2002, is focused on lending for affordable housing in tier-II and tier-III cities. The lender at present has a network of 28 branches across Tamil Nadu, Andhra Pradesh, Karnataka and Pondicherry. The loan size range from Rs 500,000 to Rs 20, 00,000 and nearly 95 per cent are under the floating category.

The company plans to disburse Rs 500 Crore and increase its loan book to Rs 1,000 Crore by March 2009.

RHFL had loans outstanding of Rs 655.08 Crore and disbursed Rs 275.58 Crore in fiscal year 2008.Balasubramanian said the company is on track to achieve its targets, helped by its direct-selling model, which has helped to cut operating costs and improve efficiency.

In December 2007, US private equity firm Carlyle Group picked up 49 per cent stake in the company for $27.7 million. RHFL now has a capital adequacy of 26 per cent, return on capital employed of 27 per cent and return of assets of 2.85 per cent.

Balasubramanian added that with the private funding, the company is adequately capitalized till 2010 to fund expansion into other states such as Maharashtra and Haryana.

“Though Carlyle is ready to bring in more funds if needed, we would be looking at fresh capital once we reach business of Rs 2,500 Crore and look at initial public offering in 2011,” he added.

In fiscal year 2008, RHFL’s net profit grew 35 per cent Rs 15.57 Crore, from Rs 11.5 Crore last year.

Courtesy: Finance Chronicle dated 29/12/2008