MUMBAI: Housing finance regulator National Housing Bank (NHB) today said there is scope for "further price wars" in the country's housing mortgage space as demand continues to be robust.

The NHB expects housing loans to clip at 20 per cent in the current financial year compared to 17 per cent observed last fiscal, especially after looking at the demand in the first half.

"Going forward, we do not rule out further price wars amongst banks themselves and the housing finance companies also," NHB chairman R V Verma told reporters at an event here.

Pointing to the signs of heightened competition, he said, some banks have lowered interest rates on housing loans, some have cut their base rates (the minimum rate of lending), while many have abolished/reduced processing fees.

"The demand for housing loans has been good and sustained and we are seeing a growth of close to 20 per cent this year compared to last year's 17 per cent," he added.

Retail lending so far has been showing signs of resilience amidst a slowdown in demand by larger borrowers due to the overall macroeconomic atmosphere.

A majority of banks are focusing on the retail sector now to overcome problems and deploy funds. Housing finance is a lucrative area for banks due to low incidences of stress, smaller ticket sizes etc.

Verma said banks account for 70 per cent of the overall lending in the housing finance. Housing Finance Companies (HFCs) constitute the rest.

On asked about how the HFCs will face the much larger in size banks in the market, Verma said HFCs have some inherent advantages like personalised services and quicker turnarounds, even though their cost of funds is high.

He said NHB will be able to meet its refinance target of Rs 17,000 crore for the July 2012-June 2013 period given the demand for housing loans and it has already disbursed Rs 3,500 crore to the bank in the first quarter ended September.

HFCs have explored newer sources of borrowings and the demand for loans will compensate for the higher cost of funds, he said.

To a question, Verma said the NHB is not considering increasing the capital adequacy requirement for HFCs from the current 12 per cent.

Scope for price wars in housing mortgage space exists: National Housing Bank - The Economic Times
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