Healthy bounce in housing loans

HOUSING FINANCE: The housing finance market has grown by 16 percent over last year.

CEO/General Manager of the Housing Development Finance Corporation (HDFC) Bank of Sri Lanka C. A. Sarathchandra confirming this growth there is a rapid development in the industry and it had gained nearly 12 percent growth last year.

This is mainly due to the high demand for housing apartments and housing townships constructed by the private sector. Most people move to urban areas, he said The amount for a housing loan has also been doubled during this period. However, the normal housing loan remains at Rs. 3 million to Rs. 5 million.

'We have noticed a 100 percent increment in high-income level segment going for housing loans in Colombo and Kandy districts, he said. Nearly 70 percent of the housing loan borrowers are low income level borrowers.

But most of the property developers are targeting middle income level and high-income level groups through their housing products.

Talking about the pay back ratio of the borrowers, Sarathchandra said that it is quite good of these borrowers.

At present interest rates for housing loans remain at 16 percent and it was two to three percent lower a few years back. Higher interest rates is one of the problems that the housing finance industry faces today, he said. Legal drawbacks in land registrations and delays in registering deeds are also affecting borrowers in obtaining loans.

Escalating building material prices also affecting the industry. Prices of the building materials have increased by 25% during last two years, he said.

HDFC Bank, State Mortgage and Investment Bank (SMIB) and NDB Bank are the three housing banks that provide housing loans apart from other commercial banks.

According to the Central Bank of Sri Lanka, housing banks have granted 23,305 housing loans and commercial banks had granted 89,335 in last year. In 2004 housing banks had granted 18,741 housing loans.