According to industry estimates, the number of home loan borrowers making foreclosures and partial repayments has almost shot up by 20-25% during the past few weeks.
In the last two months since the home loan rates started their northbound journey, all home loan financing companies' repayments and foreclosures teams have been actively engaged in counselling their customers, making them understand the pros and cons of the decision to forego or go for partial repayment of loans. It may be mentioned that the Central bank's latest CRR hike has sucked out about Rs 8,500 crore from the banking system.
Uday Sareen, country head, retail banking, ING Vysya Bank, told SundayET that the bank has seen a considerable increase in the number of queries for foreclosures and partial repayments. "In fact, the foreclosures have seen an increase of almost 10% over the previous quarter.
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By Sumit Kumar, Section Loans
Posted on Sun Aug 17, 2008 at 10:58:58 PM EST
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Deepak Parekh, chairman of HDFC, the country's largest housing finance company agrees. According to Mr Parekh, they too have witnessed a rush by home loan borrowers to make partial repayments.
"They are trying to reduce the term of their loans, which have increased due to recent interest rate hikes. These borrowers are typically the ones who have taken floating loans in the last 12-18 months and are now trying to make balloon payments through their salary bonuses," he said. Floating rates account for 90 % of the bank's home loan portfolio.
Developers across the board too confirmed to SundayET that there has been a spurt in home buyers returning or off-loading some of their home loan. With interest rates on home loans rising in the last one year, consumers are now looking at other options to acquire funds for their investments. Many also feel this will deter speculators from the real estate market.
Says Rohtas Goel, CMD, Omaxe Group: "The hike in repo and CRR rate hasn't been a good news for the real estate sector and the home loan market. It is certainly a matter of concern for consumers, as even small upward changes in the monthly EMIs can play havoc with their personal finances.
The interest rate trend over the next few months is expected to be northwards, across industry. On the flip side, this may actually prove beneficial for actual users as it will deter speculators from over leveraging themselves and cornering and hoarding housing flats for speculative gains."
Source: Economic Times, 17 Aug, 2008
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