The fast-growing housing finance market will require incremental funds to the tune of Rs 140,000 crore (Rs 1,400 billion) over the next five years.
According to a report on retail finance markets prepared by Crisil, the housing finance market will witness a growth rate of 24.1 per cent in incremental direct disbursement over the next five years.
Direct housing loan disbursements during 2001-2002 were around Rs 25,000 crore (Rs 250 billion), it said adding that incremental disbursement was expected to grow at a compound annual growth rate of 30 per cent over the next two-years.
The outstanding housing loan portfolio, estimated at Rs 53,000 crore (Rs 530 billion) in 2001-02, was expected to grow at a CAGR of 30 per cent over the next five years.
A sizable portion of growth being witnessed in the housing loans was due to pre-payment of loans to take advantage of the falling interest rates.
"The refinanced loans represent almost 18-20 per cent of the total direct disbursements of housing loans in 2001-2002," the report said.
The market share of banks in the incremental retail disbursement is expected to increase from 34.8 per cent in 2001-02 to 43 per cent in 2004-05, it said.
However, the report foresees a decline in the market share of banks, thereafter, as most public sector banks would largely focus on corporate advances and access the securitisation market to build their retail loans books.
The report forecasts a likely disbursement by banks of around Rs 44,000 crore (Rs 440 billion) in 2006-07, marginally above the estimated incremental funds available in the banking system for all priority sectors lending, excluding the farm sector.
The study on the retail finance markets in India also covers car finance, two-wheeler finance, consumer durable finance, truck finance and credit card market, apart from the housing finance market.
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