Friday, August 19 2005 19:20 Hrs (IST) - World Time -

Bangalore: India was among those countries that registered a very low housing loan penetration rate with the outstanding housing loan to the GDP being just three per cent as against 51 per cent in US, 54 per cent in UK and around 10-12 per cent in other Asian countries, according to Keki Mistry, Managing Director, HDFC.

However, with increasing income, tax concessions on housing loans and easy-to-avail-and-repay housing loans, the scenario was expected to change significantly, Mistry said during the inauguration of the HDFC `Budget Homes of Bangalore' property exhibition here this evening (Aug 19, 2005).

The potential in the home loan market sector was immense if India touches the average 12 per cent (outstanding loan to GDP) as several other Asian countries, he said.

"With more and more middle class families able to afford to buy homes, the sector is steadily growing.," he said adding that the HDFC loan disbursement was growing at the rate of 25-30 per cent annually.

The company, which had cumulatively disbursed in excess of Rs 75,000 crore so far, was aiming at a future disbursement target of close to Rs 20,000 crore.

"The growing tax concession benefits had prompted more and more people to go in for home loans. As opposed to the Rs 15,000 tax benefit on interest in the 90's the same had grown to Rs 1.5 lakh now. The tax deduction on principal repayment had also provided a spurt to people availing home loans". Mistry added.

"The increasing income level had made it possible for a person to afford a home with the total income earned in four and half to five years as opposed to the early scenario where he would have to pay off the loans with an income totalling 20 years of his earned salary", Mistry said.

"The middle class family is now better off than they were 10 years ago and with those in the BPO/IT earning handsome salaries the demand for loans had grown", he said.]

The non-performing loans for 90 days and 180 days last year had been just 1.10 percent and 0.84 per cent respectively. The mortage back security had been less than Rs 1000 crore, he said on the repayment capacity.

The demand for home loans is expected to grow

With the hitherto rural areas soon coming under the influence of modernisation and urbanisation, the demand for home loans in these sectors was also expected to grow.

Customised offerings suited to individual needs had also augmented the loan demand. HDFC had also introduced a step-up home repayment scheme for new MBA recruits or those standing on a threshold of earning high income in a couple of years.

"These clients were sanctioned loans much more than their current salary capacity since their repayment capacity was expected to increase the coming years", he said.

The option of fixed and floating interest had also helped loan seekers to pick loans that suited their pockets.

On HDFC's plans, Mistry said that it was keen in looking at interesting portfolios and taking them over. However, this would be done only after going through due diligence on the property, credit credentials and other aspects like clearance of legal titles.

On NRI loans, he said a large bulk of it came from the Middle East and there were growing queries and demands in this sector, though the current size of home loan was low.