Headline Disbursements to grow at a CAGR of 14.

5 per cent over the next 5 years

Published On

Sep 30, 2011

Abstract With high property prices and rising interest rates, impacting affordability of consumers, disbursements are expected to grow by 13.2 per cent in 2011-12. During 2011-12, the disbursements growth is projected to moderate to 12.7 per cent, on account of steady growth in volumes, moderation in property prices and rising finance penetration. In the long term, the housing finance disbursements are forecast to grow at a 5 year CAGR of 14.5 per cent, reaching Rs 3,395 billion in 2015-16 due to growth in underlying housing demand, rise in property prices and higher LTVs.

Key Issues - What is the disbursements outlook for 2010-11 and 2011-12? - What is the expected growth in disbursements over the next 5 years? -

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No part of this Report may be published/reproduced/distributed in any form without CRISIL's prior written approval.

Housing finance disbursements to grow by 13.2 per cent in 2011-12

High capital values in metros and tier-I cities and rising interest rates have adversely impacted affordability of home buyers in the first half of 2011-12. With housing finance players withdrawing teaser-rate schemes, the overall value of disbursements (excluding developer loans) is expected to reach Rs 1,961 billion - a y-o-y growth of 13.2 per cent (inclusive of balance transfer). CRISIL Research believes that overall disbursement growth in 2011-12 will be supported by an upswing in growth momentum in tier-II and tier-III cities. Although the capital values in some of the cities have stabilised, they remain largely at unaffordable levels. Due to a level playing-field in terms of interest rates and minimal service differential between players, balance transfer cases have declined. Given these prevailing factors, balance transfers are projected to come down to 2.8 per cent in 2011-12 from a high of 9.4 per cent in 2009-10, when the banks first came out with teaser-loan schemes. Excluding balance transfer cases, growth is expected to be 18.1 per cent, indicating a moderate growth in the underlying asset and an increase in finance penetration.

Disbursements to register 12.7 per cent growth in 2012-13

In 2012-13, expected stabilisation in property prices in some pockets of the country and pent-up demand from 2011-12 will cause disbursements to increase to Rs 2,211 billion - a y-o-y growth of 12.7 per cent. CRISIL Research believes that housing finance volumes are more affected by the underlying asset prices than interest rates. Also, as the pace of construction slows down, disbursement cycle also gets elongated. This is expected to contribute to disbursements growth in 2012-13 as loans sanctioned in prior periods are availed with progress in the construction activity.

Disbursements to record a 5-year CAGR of 14.5 per cent

Over the next 5 years, CRISIL Research forecasts disbursements to grow at CAGR of 14.5 per cent to reach Rs 3,395 billion in 2015-16. With players coming under regulatory scrutiny, interest rate differential between rates offered to old and new customers will come down significantly; as a result CRISIL Research expects balance transfer cases to decline and stabilise in the range of 2-3 per cent. Increase in volumes, rise in property prices and steady increase in finance penetration will play a significant role in determining the growth of the housing finance market.

Growth in housing finance disbursements

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No part of this Report may be published/reproduced/distributed in any form without CRISIL's prior written approval.

<pre> E: Estimated; P: Projected Source: CRISIL Research

Impact of balance transfer on disbursement growth

E: Estimated; P: Projected Source: CRISIL Research

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