The craze for retail credit has, unfortunately, proved to be detrimental for the home loan services provided by the banks. In fact, recent data (April 2012 to January 2013) shows that the growth line has been almost flat for quite some time now.

As a result, home loans saw a growth rate of 10.4 per cent this year as compared to the 10.5 per cent in a similar time span, last year.

Banks that are working towards promoting their home loan services fast, are ruthlessly dominating over loans offered by other banks. The bi-polar policy they have adopted has lower interest rates on one hand and securitization, on the other. Even the State Bank of India (SBI), which is so well known for offering the best deals in home loan within India, has seen a home loan growth rate of 14.28 per cent as of the 1st quarter of December 2012. Out of this 14.28 %, 15 % is an appropriation from other banks. But these two taken together makes the net home loan growth rise to about 12 %, slightly higher than the sector expansion.

This growth, no matter how small, has been possible for SBI, because it has removed all pre-payment penalties from home loans now. A source has confirmed that many customers are transferring their home loans to banks that offer lower interest rates. This cost advantage of the SBI over other banks has naturally attracted many new customers, thereby, speeding up their loan expansion, on an aggregate.

Year on year growth in home loans have also gone down this year. Compared to the 13.3% last year, this year, it’s only 12.3%. The year before last year saw an even steeper growth rate of 15.1%, although the interest rates were higher than now.

The co head at the financial sector rating for Icra, Vibha Batra, has said that the transfer of home loans from one bank to another started happening at a point of time, when the overall growth curve of the sector was flat. A sudden hike in the house prices and constant inflation seem to have hit hard the market for house selling.

According to a bank official, retail growth is still under limelight right now. However, development would be seen only next year, as the idea about the interest rate is anticipated to be much lower. So long, buyers have postponed their investments because of this.

A finance analyst declared that the lack of demand from the corporate sector has increased the focus on retail credit. But it is difficult to say whether it will succeed before a few months or not.

Most of the public sector banks are offering up to Rs. 75 lakhs at the base rate for an interest of 10.25%. However, for SBI, the upper cap is up to 30 lakhs with a 25 basis point spread, thereby, bringing down the interest to 9.95%. No other nationalized bank has such a lucrative home loan interest on offer.