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The RBI policy has imposed stringent norms on banks lending to housing sector with respect to:
• LTV ratio capped at 80%.
• Risk weights on housing loans above INR 7.5 mn increased to 125%.
• Standard asset provisioning for commercial banks on teaser loans increased to 2% (from 0.4%).
n Our view
• As far as banks are concerned, the impact of standard provisioning being raised from 0.4% to 2% will have marginal impact on credit cost (less than 5bps). However, RBI has clearly signaled that it would prefer banks to discontinue with teaser schemes, leading to some moderation in demand.
• Moreover, players were competing on LTV apart from rates which will also be capped now.
• The central bank is also bringing back focus on affordable housing by increasing risk weight on loans above INR 7.5 mn.
• We believe competition amongst players will now be more a function of funding cost than LTV and teaser schemes.
Though it is not applicable to HFCs (as they are governed by NHB and not RBI), we believe NHB will follow these norms with a lag. In that case, impact on HFCs will be relatively higher with respect to credit cost and competitive advantage.
Bank/HFC specific details
ICICI Bank
~INR 40 bn of housing loans are under special home loan schemes (8% of housing loan book, translating into marginal ~2% of overall loan book).
SBI
We believe for SBI as well housing loans under special schemes will be less than 2% of overall advances.
LIC Housing Finance
• Proportion of loans above INR 7.5 mn is less than 1%.
• Currently, INR 10 bn (27% of individual loan book) is under Fix-O-Floaty scheme and INR 2-3 bn (5-6% of loan book) is under Advantage 5 scheme.
HDFC
• Proportion of loans above INR 7.5 mn is less than 10%.
• 27% of its individual loan book is under the dual rate scheme.
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