SBI surprise: Growth in home loan portfolios

When the nation is yet to recover from the shock of increased repo rates, the State Bank of India (Bangalore Circle) has made it to the headlines by announcing its plan to increase its home loan portfolio by 22% to meet its target of Rs 2200 crore in this fiscal year.

Home loans have become pretty expensive with SBI, especially because of the hike in benchmarking rates and redrawing of the pricing of retail loans. In addition, the bank has also increased its deposit rate to accelerate fund mobilization, making it a more expensive bank to borrow from. This raises the question- Is the banks plan to increase the home loan portfolio by 22% in Bangalore a right move?

There is no two ways about the fact that property buyers have a lot of interest in Bangalore’s realty market. Furthermore, statistics confirm that the Garden City is the next prime real estate destination in terms of volume, after Delhi, NCR and Mumbai. This offers the absolute answer to the recent move by SBI(Bangalore).

Story Highlights

It is a well known fact that SBI takes the lead in the field of home loans.
As an attempt to rack up the figure of Rs 2200-crore target, the bank has made its processing center more firm and has future plans to come up with few more. After Banaswadi, Koramangala and Basavanagudi, the bank has plans to open up in Hebbal, Peenya and Yelahanka.

With the increase in repo rates, home loans via SBI have become a pretty expensive affair. Along with new borrowers, existing ones will also feel the heat of increased repo rates by a rise of 10 basis points. Though the benchmark base rate has been revised from 9.75% to 9.8%, SBI still stands as the cheapest home loans provider. This fact further encourages the bank to increase its home loan portfolio.

Presence in Tier-II cities

Along with Bangalore, the bank has a strong presence in Tier-II cities as well. Mysore and Mangalore are among the few cities which have witnessed some traction and a similar activity is expected to gain momentum in Belgaum.

Hubli and Gulbarga are some of the cities where the bank has not left its mark and has not shown much traction. More than 90% of the home loan portfolios is pitched in by Bangalore. even though few investors are actually dwelling outside the city.

SME

SBI’s unfolding to the SME segment has been somewhat a faux pas. The setback has mainly been triggered by some industries added with the poor investment climate, due to the disturbance in Bellary-Hoskote belt. The bank has experienced major setback in SME and in agriculture.

Looking at the increase of number of residential projects in the city and the consistent demand of housing units, the SBI thinks that its move to increase the home loan portfolio is a valid one. Irrespective of the increase in repo rates, home loans will still be availed by borrowers and this will sum up to a target of Rs 2200 crore that is likely to meet the fiscal objective of the government.

Bangalore’s realty marke