Mortgage disbursals are far exceeding the amount of outstanding home loans, indicating faster industry-level growth and a pronounced revival in incomes that has prompted end-users to prepay liabilities or reduce debt through lump-sum part payments ahead of schedule.
An analysis of data showed that higher repayments and prepayments optically limit the pace of mortgage expansions.
In FY23, for instance, the combined outstanding home loan portfolio of public sector and private banks and housing finance companies, which account for a big majority of the home loan market in the country was, Rs 3.62 lakh crore. But disbursements were much higher – at Rs 8.08 lakh crore.
In terms of growth, while the outstanding portfolio grew 16%, the disbursements expanded 20%, according to the data released by the National Housing Bank.
A longer term analysis of data shows that growth in home loan disbursement is fast outpacing the growth in incremental outstanding loans in a year. This implies that the borrowers are increasingly repaying or also prepaying their loans that tends to lower the outstanding amounts.
Granular data is not mandatory and is released at the discretion of individual banks. In FY24, State Bank of India, which has 25 percent of market share, said its outstanding portfolio rose 13 percent, disbursements rose 17 percent and sanctions rose 21 percent.
“Although home loan growth seems lower than overall retail, in absolute terms the growth is quite strong,” said SBI chairman Dinesh Khara at a recent media briefing. “We have got repayments also. So, the net growth appears low. We have to see the actual growth in terms of sanctions and disbursements.”
For Bank of India, the outstanding home loans rose Rs 8,000 crore in FY24, while disbursal rose Rs 23,000 crore.
“There are run-down balances as pre-closures happen,” said Rajneesh Karnatak, CEO and managing director. “When certain borrowers have surplus cash, they prefer prepaying loans.”
With the revival of the economy and improvement in the income levels, sizable borrowers of home loans are using their surplus funds to repay and prepay their loans so that the interest burden is also less, said a senior analyst with a rating agency.
This also likely explains the fall in household financial savings in FY’23 as surplus funds are used to buy real assets.
“Household net financial savings flows were lower in FY23 and there were some concerns around that, which said households are saving less,” said chief economic advisor Anantha Nageshwaran at an event organised by think tank NCAER earlier in the month. “But, in reality, it was a portfolio shift where the savings were going into real assets.”
