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ICICI sees pre-payments on home loans

ET: ICICI Home Loan Borrowers pre-pay

ICICI Bank, the country’s second-largest mortgage lender, says it has witnessed a 15% jump in foreclosures [should be “preclosures”] following interest rate hikes, as more borrowers want to pre-pay home loans to avoid higher interest burden. The bank feels there has been a 35% decline in home sales in the past 18 months. This drop does not take into account the impact of the latest round of rate hikes.

“Unlike in the US, where foreclosure would mean borrowers sending keys to the banks, here it’s complete payment of loan before schedule. As interest rates rise, borrowers tend to go in for pre-payment,” says ICICI Bank retail asset head Rajiv Sabharwal.

(Emphasis mine.)

35% drop in sales. Uhem. Tough on the credit growth.

The second para above is interesting. So people haven’t mailed in keys yet – they can’t, as all loans in India are with recourse, meaning if the bank can’t recover the money using your house, they’ll go after your other assets.

But with real estate pricing dipping and the bust not completely in yet, are we going to see prices fall another 40% and thus, start a real foreclosure process?

Disclosure: No positions.

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