India's biggest mortgage company has warned of "dangerous lending practices" creeping into an overheated home-loans market that is growing by as much as a third each year. Deepak Parekh, chairman of Housing Development Finance Corporation, said lenders were "inviting trouble" with practices that could lead to the sort of problems that plagued mature home- loan markets such as Hong Kong a decade ago.
Mortgage finance in India is rising 30 per cent a year and accounts for about half of the vibrant consumer loans market. But mortgages account for only 1 per cent of India's gross domestic product compared with 10-20 per cent in south-east Asia. Home ownership is becoming an affordable reality for millions of low-income earners in a country that still has a housing shortage of 19.4m units, according to HDFC. Demand for home loans has been helped by a 700 basis point fall in interest rates in the past three years, tax relief on mortgages that clips three percentage points off a mortgage currently costing 8 per cent, stable house prices and rising incomes.
"House purchase typifies the rise of the new consumer class and banks are driving the rise. But aggressive new lenders have emerged, and that's made competition fierce," says R Ravimohan of Crisil, a leading credit rating agency in Mumbai. HDFC's mortgage is typically 24-30 times monthly income. The average loan size is Rs400,000 (Dollars 8,900), a conservative 55 per cent of the asset value. HDFC lends to every second new house buyer but its market share of nearly 50 per cent share of the Rs242bn of new mortgage lending last year is under pressure from its competitors.
Mr Parekh says: "We do not feel under pressure to raise our multiples to attract more customers. Our funding will continue to be based on their cash flow, not asset value." New entrants are less conservative, tapping a growing consumer appetite for credit. Some lenders agree to loans based on income multiples as high as 60 times monthly income. Competitive pricing is also putting a strain on banks' margins on new lending.
"We are seeing some crazy lending, in some instances over 100 per cent of the purchase price. This is not affordable. It's the kind of lending that could spoil the market for everyone," Mr Parekh said in an interview with the Financial Times. More mortgages have also led to a small but manageable climb in defaults, which vary from less than 1 per cent at HDFC to more than 2 per cent at some of the new lenders.
Observers say the buoyant lending market could be tested by two new factors. With new lenders giving loans based on generous income multiples, a crash in house prices could land homeowners with what would be a new problem in India - negative equity, the curse of markets such as the UK in the 1990s. Similarly, interest rate volatility could force banks to offer fixed as well as variable mortgages with uncertain implications as customers contemplate another unfamiliar practice - hopping from one mortgage product to another to minimise the impact of volatility.
Mortgage finance in India is rising 30 per cent a year and accounts for about half of the vibrant consumer loans market. But mortgages account for only 1 per cent of India's gross domestic product compared with 10-20 per cent in south-east Asia. Home ownership is becoming an affordable reality for millions of low-income earners in a country that still has a housing shortage of 19.4m units, according to HDFC. Demand for home loans has been helped by a 700 basis point fall in interest rates in the past three years, tax relief on mortgages that clips three percentage points off a mortgage currently costing 8 per cent, stable house prices and rising incomes.
"House purchase typifies the rise of the new consumer class and banks are driving the rise. But aggressive new lenders have emerged, and that's made competition fierce," says R Ravimohan of Crisil, a leading credit rating agency in Mumbai. HDFC's mortgage is typically 24-30 times monthly income. The average loan size is Rs400,000 (Dollars 8,900), a conservative 55 per cent of the asset value. HDFC lends to every second new house buyer but its market share of nearly 50 per cent share of the Rs242bn of new mortgage lending last year is under pressure from its competitors.
Mr Parekh says: "We do not feel under pressure to raise our multiples to attract more customers. Our funding will continue to be based on their cash flow, not asset value." New entrants are less conservative, tapping a growing consumer appetite for credit. Some lenders agree to loans based on income multiples as high as 60 times monthly income. Competitive pricing is also putting a strain on banks' margins on new lending.
"We are seeing some crazy lending, in some instances over 100 per cent of the purchase price. This is not affordable. It's the kind of lending that could spoil the market for everyone," Mr Parekh said in an interview with the Financial Times. More mortgages have also led to a small but manageable climb in defaults, which vary from less than 1 per cent at HDFC to more than 2 per cent at some of the new lenders.
Observers say the buoyant lending market could be tested by two new factors. With new lenders giving loans based on generous income multiples, a crash in house prices could land homeowners with what would be a new problem in India - negative equity, the curse of markets such as the UK in the 1990s. Similarly, interest rate volatility could force banks to offer fixed as well as variable mortgages with uncertain implications as customers contemplate another unfamiliar practice - hopping from one mortgage product to another to minimise the impact of volatility.
1 komentar:
According to his situation Mr Parekh has said great on the Home Loan India .And his saying "We do not feel under pressure to raise our multiples to attract more customers. Our funding will continue to be based on their cash flow, not asset value." is to some extent right
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