Loan seekers, particularly in Delhi, may find themselves dealing with cautious bankers, with ICICI Bank chief executive and managing director K V Kamath saying his bank — the second largest in India — would be more stringent in screening housing loans.

Expressing fears similar to those voiced by Reserve Bank of India and HDFC chief Deepak Parekh, Kamath said property prices in certain pockets of India were on the higher side. "Property prices in pockets could be hot. Delhi is hot, Mumbai is not as hot," he said.

Tax breaks and low interest rates, in a market driven by the likes of ICICI Bank and HDFC, have resulted in residential property prices in and around Delhi rising at least three times during the last three years and there are few signs of costs coming down.

ICICI Bank is seen as one of the most aggressive players in the market. Loans to real estate sector account for nearly 30% of the bank’s portfolio, with very little exposure to realty companies and home loans by individuals accounting for a bulk of the real estate portfolio. With the earlier eagerness to court loan seekers giving way to wariness, a cautious stance may lead to tightening.

Prices apart, banks are known to raise rates and increase due diligence on potential customers when a certain category of loans account for a large share of their debt portfolio.

A more stringent screening process may mean that those who already have a sizable debt burden by way of personal loans, car loans or are already paying EMIs for an earlier house, may be given a smaller loan. Besides, those who have defaulted on paying installments on a previous loan or have been irregular in clearing credit card dues may face some tough time and also higher interest rates.

Kamath’s statement comes just days ahead of the credit policy review where interest rate increases are expected to be back in focus as a worried central bank is trying to check overheating in the economy, particularly the real estate sector. RBI is expected to raise rates for banks to ensure that the cost of funds for banks go up resulting in higher interest rates so that people are discouraged from borrowing.
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