Large loans on the rise in banks’ home portfolio

MUMBAI: Banks have seen a rise in the proportion of home loans above Rs 30 lakh in the past two years, reflecting the sharp increase in home prices over the past few years.

However, loans below Rs 30 lakh still account for more than half the banking sector’s home mortgage portfolio. The share of larger-sized home loans rose to 42.45% in September from 33% in March. The total home loan portfolio of banks is Rs 5 lakh crore, of which Rs 2.1 lakh crore is accounted for by mortgages above Rs 30 lakh.

Loans below Rs 30 lakh qualify as priority sector lending for banks. The data also reflect rising home purchases in smaller cities, where prices are relatively more affordable. “We seeing strong growth in retail from tier-II and tier-III cities,” said a senior official at a state-owned bank. “A sizeable portion of this demand is for home loans.”

According to the National Housing Bank Residex, home prices rose in 12 cities and remained stable in four in the September quarter compared with the June quarter. Besides major metros such as Mumbai, Kolkata and Chennai, properties in Hyderabad, Ahmedabad, Lucknow, Patna and Surat also became costlier by about 2-4%, according to NHB data.

Buyers generally finance up to 80% of the value of homes through loans from banks and finance companies. In metros such as Mumbai and Delhi and even in satellite towns in their neighbourhood, prices have risen, with small-sized homes costing more than Rs 30 lakh.