REPORT ON TREND AND PROGRESS OF HOUSING IN INDIA - JUNE, 2001-02

Institutional Framework for Housing Finance : Banks

The National Housing & Habitat Policy, among other things, envisaged the development of a viable and accessible institutional system for the provision of housing finance wherein housing boards and development authorities would concentrate on acquisition and development of land and infrastructure with the financial system providing easy access to more affordable institutional finance for individuals for construction/buying of houses/flats. In this context, the banking sector, with its vast branch network throughout the length and breadth of the country, occupy a very strategic position in the financial system and is expected to play an important role to play in providing credit to the housing sector.

The banking sector continued with the vigor displayed in the field of housing finance in the last few years and once again surpassed the minimum yearly housing finance allocation of 3% of the incremental deposits as stipulated by the Reserve Bank of India by a considerable margin. Significantly, the aggregate housing finance by banks, inclusive of direct, indirect housing finance and subscription to NHB/HUDCO bonds, matched that of the housing finance companies during 2001-02 with the disbursal figure touching Rs.14744.85 crore as against that of Rs.14614.44 by the HFCs.

With a view to encourage the growing contribution of the banking sector in the housing finance sector in the country, the Reserve Bank of India (RBI) in the Credit and Monetary Policy in April, 2002, announced certain measures for facilitating housing finance by Banks.

Till the time banks’ loans and advances secured by mortgage on residential property and also commercial property were assigned a risk weight of 100 per cent for capital adequacy purposes. However, no explicit risk weights had been prescribed for banks’ investment in securitised papers. The Basel Capital Accord of 1988 and also the New Capital Adequacy Framework, which is at the consultative stage, envisage risk weight of 50 per cent and 100 per cent for claims secured by residential property and commercial real estate, respectively.

Accordingly, RBI also liberalised the prudential requirements for housing finance by banks on the following lines:

Banks extending loans against residential housing properties would be required to assign risk weight of 50 per cent, instead of present 100 per cent. Loans against the security of commercial real estate would continue to attract 100 per cent risk weight as hitherto.

Investments made by banks in Mortgage Backed Securities (MBS) of residential assets by HFCs, which are recognised and supervised by NHB, would also be assigned a risk weight of 50 per cent for the purpose of capital adequacy. However, investment by banks in MBS of housing assets, which include commercial properties, would attract 100 per cent risk weight.

Investments by banks in MBS issued by HFCs supervised by NHB will be reckoned for inclusion in the prescribed housing finance allocation of 3.0 per cent.

Besides, a Working Group was proposed to be set up to suggest modalities for widening the investor base in MBS, improving the quality of assets, creating liquidity for trading in such assets and other related issues.

The details of performance of commercial banks in the housing finance sector during the last three years can be summarised as below:

1999-2000 (Rs. in crore)
BANK-GROUP (1) Allocation (2) Achievement (3) Direct HF (4) Indirect HF (5) NHB/HUDCO Bonds
State Bank & Associates 725.29 1383.47 1205.06 128.78 49.63
Nationalised Banks 1668.10 5981.05 1710.1 2975.97 1294.98
Indian Pvt. Sector Banks 468.10 2209.3 522.3 805.96 881.04
Foreign Bank 190.03 337.53 159.94 135.73 41.86
TOTAL 3051.52 9911.35 3597.4 4046.44 2267.51
HF: Housing Finance;
(2)= (3) + (4) + (5) Source: IECD, RBI

2000-2001 (Rs. in crore)
BANK-GROUP (1) Allocation (2) Achievement (3) Direct HF (4) Indirect HF (5) NHB/HUDCO Bonds
State Bank & Associates 1070.32 2087.83 1950.09 91.20 46.54
Nationalised Banks 1533.04 5282.46 2800.90 1815.77 665.79
Indian Pvt. Sector Banks 631.26 2061.47 645.06 859.87 556.54
Foreign Bank 175.33 355.48 157.06 105.01 93.41
TOTAL 3409.95 9787.24 5553.11 2871.85 1362.28
HF: Housing Finance;
(2)= (3) + (4) + (5) Source: IECD, RBI

2001-2002 (Rs. in crore)
BANK-GROUP (1) Allocation (2) Achievement (3) Direct HF (4) Indirect HF (5) NHB/HUDCO Bonds
State Bank & Associates 1396.43 2851.54 2636.34 174.40 40.80
Nationalised Banks 2620.72 8914.89 4963.62 3838.60 112.67
Indian Pvt. Sector Banks 742.74 2152.74 696.79 1192.85 263.1
Foreign Bank 399.33 825.68 269.66 494.42 61.6
TOTAL 5159.22 14744.85 8566.41 5700.27 478.17
HF: Housing Finance;
(2)= (3) + (4) + (5) Source: IECD, RBI

However, as per the RBI guidelines, direct housing finance up to Rs. 5 lakh provided per dwelling in semi-urban/rural areas and up to Rs. 10 lakh provided in urban/ metropolitan areas would only be considered eligible for being treated as ‘housing finance’ under the Annual Housing Finance Allocation. Housing loans beyond these stipulated size-limits would not be considered as achievement under the allocated target.

As can be seen from the figure above, every year since 1999-2000, the banking sector crossed the stipulated minimum allocation by a significant margin.

From the changing composition of the housing finance disbursement by banks over the years, it is evident that the share of direct housing finance is gradually increasing. The percentage distribution of aggregate housing finance by banks during the last three years is given below:

Year Direct HF (%) Indirect HF (%) NHB/HUDCO Bonds (%) TOTAL
1999-2000 36.29 40.83 22.88 100.00
2000-2001 56.74 29.34 13.92 100.00
2001-2002 58.10 38.66 3.24 100.00


As can be seen, over the years the nationalised banks maintained there majority share in the housing finance market followed by the SBI group and the Indian private sector banks. However, in recent times, the foreign banks are also evincing interest in housing finance business, especially in metropolitan areas.

The details of region-wise classification, size-wise classification and population & bank group wise classification of outstanding housing loans of scheduled commercial banks are given below:

Region-wise classification of Outstanding Housing Loans of
Scheduled Commercial Banks as on March 31 (Rs. in crore) 2000 2001 2002
Region / State/UT No. of A/c s Amountoutstanding No. of A/c s Amountoutstanding No. of A/c s Amountoutstanding
Northern Region
Haryana 55819 451.01 55668 585.48 42965 672.20
Himachal Pradesh 18314 137.00 21885 199.58 14863 198.79
Jammu & Kashmir 16958 116.26 18737 168.13 18367 218.46
Punjab 92151 635.99 98732 868.14 83064 1191.16
Rajasthan 92965 795.02 105365 1095.39 83060 1342.50
Chandigarh 7829 84.15 9380 135.69 7147 160.46
Delhi 54749 1151.45 54524 1468.33 42908 1720.92
Region Total 338785 3370.88(65.15) 364291 4520.74(34.11) 292374 5504.49(21.76)

North-Eastern Region
Arunachal Pradesh 153 1.75 145 2.95 299 10.02
Assam 26043 188.05 22307 242.67 18535 314.91
Manipur 1482 9.38 1441 12.14 1028 18.41
Meghalaya 1541 11.62 1235 15.28 1152 25.48
Mizoram 1646 10.66 2203 21.91 1618 34.18
Nagaland 729 4.03 484 5.24 344 5.63
Tripura 4124 15.63 2848 20.23 1841 26.52
Region Total 35718 241.12(26.66) 30663 320.42(32.89) 24817 435.15(35.81)
Eastern Region
Bihar 86500 509.29 58222 493.07 37270 499.12
Jharkhand ------- -------- 24534 202.24 17184 270.40
Orissa 50438 359.47 67628 539.74 87950 1018.92
Sikkim 1025 4.85 1494 14.56 1260 25.20
West Bengal 170664 1094.05 171963 1352.29 118175 1889.65
Andaman & Nicobar Islands 392 4.58 323 4.67 308 7.46
Region Total 309019 1972.24(21.30) 324164 2606.57(32.16) 262147 3710.75(42.36)
Central Region
Chhatisgarh ------- -------- 24323 176.99 14534 235.48
Madhya Pradesh 115143 790.93 118825 994.67 81737 1131.74
Uttar Pradesh 189154 1323.14 194461 1383.04 123446 2012.95
Uttaranchal ------- -------- 22822 178.28 16123 247.69
Region Total 304297 2114.07(54.71) 360431 2732.98(29.28) 235840 3627.86(32.74)
Western Region
Goa 9948 81.69 9548 105.13 5781 109.30
Gujarat 136991 972.67 157055 1225.62 100943 1298.33
Maharashtra 273926 2725.73 323287 4299.68 209787 5772.99
Dadra & Nagar Haveli 61 0.52 83 0.91 167 2.88
Daman & Diu 343 1.75 283 1.95 185 2.52
Region Total 421269 3782.36(63.23) 490256 5633.29(48.94) 316863 7186.02(27.56)
Southern Region
Andhra Pradesh 216264 1736.22 228431 2194.03 163476 2814.56
Karnataka 193582 1788.32 196310 2425.59 163726 3204.43
Kerala 212651 1481.80 269673 1948.01 173325 2473.00
Tamil Nadu 217586 2008.26 214050 2995.12 180539 3821.58
Lakshadweep 19 0.13 17 0.17 19 0.39
Pondicherry 4200 29.48 4511 35.50 3189 47.69
Region Total 844302 7044.21(45.67) 912992 9598.42(36.26) 684274 12361.65(28.79)
Total All India 2253390 18524.88(49.68) 2482797 25412.42(37.18) 1816315 32825.92(29.17)
Source: Basic Statistical Returns, RBI (figures in parenthesis indicate percentage growth)

The housing finance assistance from commercial banks continued to remain concentrated in southern and western part of the country with almost 60% of outstanding housing loan portfolio whereas the north-eastern region continued to lag behind. However, while in the previous year all the regions, except the central region, registered more than 30% growth in outstanding housing loan on a year-on-year basis, this year only three regions, viz., north-eastern, eastern and central region, could cross the 30% growth margin. Overall the outstanding housing loan of the banking sector increased by 29.17% to reach Rs.32825.92 crore at the end of March, 2002 as compared to the growth rate of 37.18% registered in the previous year.

Size-wise classification of Outstanding Housing Loans of
Scheduled Commercial Banks as on March 31 (Rs. in crore) Loan Slab 2000 2001 2002
No. of A/cs Amount No. of A/cs Amount No. of A/cs Amount
Rs.25,000 and Below 417271 454.36 536572 552.09 244376 280.1
Above Rs.25,000 and Upto Rs.2 Lakh 1627721 8919.06 1620279 9543.99 1133744 10840.76
Above Rs.2 Lakh and Upto Rs.5Lakh 185519 5497.72 285328 9232.89 350284 10979.69
Above Rs.5 Lakh and Upto Rs.10 Lakh 17735 1140.31 30933 1996.41 67146 4305.7
Above Rs. 10 Lakh and Upto Rs.25 Lakh 3873 496.60 7639 1053.29 16870 2197.86
Above Rs. 25 Lakh and Upto Rs.50 Lakh 712 183.62 1278 322.53 2773 772.71
Above Rs. 50 Lakh and Upto Rs.1Crore 280 141.52 380 208.27 610 314.19
Above Rs. 1 Crore and Upto Rs. 4 Crore 171 298.29 252 432.40 344 482.56
Above Rs. 4 Crore and Upto Rs. 6 Crore 49 192.92 49 198.42 55 182.28
Above Rs. 6 Crore and Upto Rs.10 Crore 25 192.12 25 183.60 40 219.55
Above Rs. 10 Crore and Upto Rs. 25 Crore 19 335.95 41 642.79 37 496.48
Above Rs. 25 Crore 15 672.41 21 1045.74 36 1754.04
Total 2253390 18524.88 2482797 25412.42 1816315 32825.92
Source: Basic Statistical Returns, RBI

One significant trend that can be observed from the above table is the growth of outstanding housing loans in the three slabs between Rs. 5 lakhs to Rs.50 lakhs, all of which registered a more than 100% increase. This indicates an increase in the average loan size.
Population-group and Bank-group wise classification of Outstanding Housing Loans of Scheduled Commercial Banks as on March 31
(Rs. in crore)
2000 2001 2002
No. of A/cs Amount No. of A/cs Amount No. of A/cs Amount
RURAL
- SBI & Associates 71286 431.22 87817 681.09 76727 1079.28
-Nationalised Banks 220578 1125.83 193457 1405.43 137200 1480.97
-Foreign Banks 13 3.03 7 0.26 79 4.54
-RRBs 64549 198.45 70941 274.24 63566 430.77
-Other SCBs 18761 148.41 20152 172.81 14634 164.31
TOTAL 375187 1906.94 372374 2533.83 292206 3159.87
SEMI-URBAN
- SBI & Associates 241312 1728.17 266044 2298.08 199183 3124.50
-Nationalised Banks 276716 1771.59 266158 2289.99 191234 2523.65
-Foreign Banks 0 0 0 0 0 0
-RRBs 39174 184.90 64334 279.54 42065 364.21
-Other SCBs 66465 461.12 102965 638.56 47815 681.86
TOTAL 623667 4145.78 699501 5506.17 480297 6694.22
URBAN
- SBI & Associates 238862 2233.81 298573 3000.58 213726 4105.66
-Nationalised Banks 395436 2857.76 390640 3738.76 290572 4840.53
-Foreign Banks 43 2.53 576 32.01 452 27.45
-RRBs 35240 189.09 58126 257.50 48762 313.67
-Other SCBs 37693 298.50 47014 397.01 35129 503.10
TOTAL 707274 5581.69 794929 7425.86 588641 9790.41
METROPOLITAN
- SBI & Associates 121686 1434.70 155555 1999.05 110507 2833.09
-Nationalised Banks 337978 3601.09 386982 5250.45 272989 6618.93
-Foreign Banks 57753 1244.63 34793 1979.67 38221 2886.44
-RRBs 904 12.04 795 13.45 1211 19.65
-Other SCBs 28941 597.97 37868 703.94 32243 823.31
TOTAL 547262 6890.43 615993 9946.56 455171 13181.42
All-INDIA
- SBI & Associates 673146 5827.89 807989 7978.80 600143 11142.53
-Nationalised Banks 1230708 9356.27 1237237 12684.63 891995 15464.08
-Foreign Banks 57809 1250.22 35376 2011.94 38752 2918.43
-RRBs 139867 584.48 194196 824.73 155604 1128.30
-Other SCBs 151860 1506.02 207999 1912.32 129821 2172.58
TOTAL 2253390 18524.88 2482797 25412.42 1816315 32825.92
Source: Basic Statistical Returns, RBI

The above analysis indicates that the growth in outstanding housing loans is highest in case of metropolitan areas. Overall, at the end of the financial year 2001-02, the outstanding housing loans of scheduled commercial banks was 6.12% of the outstanding gross bank credit, which was an improvement from 4.83% as at the end of the previous fiscal.