The strict lockdown in the first quarter of the year 2020 resulted in creating increased demand for home loans, which is finding great attention in the market.
According to TransUnion CIBIL data, home loan inquiry volumes in July and August have exceeded 2019 levels but were still below January and February 2020 levels.
The revival is being led by public sector banks, which were the first to recommence operations. Personal loan inquiries from public sector banks are 118% of last year and 102% of the pre-Covid months in 2020. Private banks are still doing only three-fourths of last year while NBFCs and finance companies are seeing half as many applications as the pre-Covid months.
Lenders send a query to the credit bureau whenever a borrower seeks to know his loan eligibility. Although credit inquiries may not match loan disbursements, they are a good indicator of demand in the market.
Inquiries get triggered whenever a borrower seeks to shift his loan from one lender to another to avail of lower interest rates.
Around half a dozen public sector banks, including State Bank of India, Bank of Baroda, and Union Bank are offering home loans below 7%. In the private sector, HDFC and ICICI Bank are also offering loans below 7%. Also, the Maharashtra government is giving incentives on home loans in the form of reduced stamp duty of 2% instead of 5% between September and December 2020.
Where demand is still very subdued is in the personal loan segment, where inquiries are only 40% of pre-Covid and 47% of last year. Credit cards, which are sold largely through direct selling agents at kiosks and in stores, are seeing subdued demand. Inquiries for cards are only 61% of January and February 2020.
“With larger metro locations witnessing increased cases of Covid-19 and intermittent lockdowns, there was also a shift in the mix of inquiries away from these urban locations to more rural and semi-urban areas,” said TransUnion Cibil in a report released here on Tuesday.
According to a report by Macquarie Research on credit cards, new additions are likely to slow because of fewer job creations. ” Since March 2020 gross job addition has seen a significant reduction – a drop of around 60%. Further, lockdowns have resulted in lower branch footfalls and near-complete stoppage in kiosk-based canvassing of customers in malls and airports,” the report said.