Demand for mortgages rises on favourable market conditions

New Delhi: Though Covid-19-induced lockdowns significantly affected retail and SME balance sheets, some factors such as aggressive discounting by developers, reduction in stamp duty and low interest rates resulted in a gradual surge in demand for mortgages, brokerages said on Friday.
According to a report by Emkay Global Financial Services, though the growth trend for mortgage business has moderated, it is improving as the pandemic affected economy returns back to normalcy.
The overall mortgage portfolios (housing and loan against property or LAP) of large banks and housing finance companies (HFCs) grew 7 per cent YoY and 3 per cent year to date (YTD) in the April-September period of current year.
The growth has been led by banks with 4.7 per cent YTD growth, while HFCs saw 2.5 per cent growth YTD.
HFCs have continued to lose market share, however, the pace of loss has eased, with the overall share at 36.2 per cent in September 2020 against 36.7 per cent in March 2020.
Among the HFCs, HDFC stands out with a steady share of 17 per cent, whereas LICHF lost 30bps share YTD to 9.9 per cent. Surprisingly, SBI witnessed a consolidation with 23.5 per cent in September against 23.8 per cent in March, whereas ICICI Bank has seen significant growth with market share rising to 11 per cent from 10.4 per cent in March.
Spurred by a shift to secured lending (due to concerns around unsecured retail loans) and tight liquidity conditions for HFCs, the overall mortgage market share of banks has improved to about 63.8 per cent as of September 2020 vs 62.3 per cent as of September 2019. Consequently, the market share of HFCs has fallen to about 36.2 per cent as of September this year vs. 37.7 per cent in the same month last year.
The trend is likely to remain favourable for banks through FY21. However, with some ease in liquidity conditions and cheap cost of funds, HFCs may regain their lost ground, the brokerage said.