The upward trend in home loan rates looks set to continue with banks understood to be considering higher charges for those seeking loans for a second home or above the Rs 15-20-lakh limit. This could further accelerate the slowdown in the home loan segment, which began in the end of 2006, following a series of measures by the Reserve Bank of India designed to reduce credit flows to sensitive sectors such as realty, stock-markets and consumer durables. India’s largest private sector lender, ICICI Bank, is considering charging more for loans for second homes. “As of now, we don’t differentiate but we are evaluating the scene and will take a decision in a week’s time,” Bank’s Senior General Manager Rajeev Sabharwal told media here on Sunday.

 The bank is already discouraging second home buyers with credit norms being tighter for this category. “Applications for second homes get filtered and we also charge higher margins of around 25-35 per cent for such loans.” There were two options that could be considered, he said. The first was charging more for second loans while the second was charging less for loans below Rs 15 lakh. Presently, ICICI Bank is charging 12 per cent for home loans of Rs 15 lakh. Asked whether the move to impose higher charges on second home loans was prompted by the RBI’s directive to reduce credit flows to the realty sector, Sabharwal said that “the market has already slowed down.” Union Finance Minister P Chidambaram had also called upon banks to curb retail loans. The realty sector had witnessed a steep rise in valuations which some analysts described as unsustainable. However, following a series of rate hikes combined with a 1.50 per cent increase in CRR limits in three phases effected by the RBI since November last, credit flows to sensitive sectors are beginning to witness a slowdown.

A greater number of drivers in the UK are opting for cars with lower carbon emissions, according to new figures, many bought using car finance or car loans.Between 2000 and 2006 the number of new cars bought in Britain that are classed in road tax band B has risen dramatically from 3,500 to 110,000 vehicles, a jump in market share from 0.1 per cent to 4.7 per cent, reports SMMT.Likewise, new cars bought in band C have jumped from 421,000 to 747,000, showing that the British public is keen to embrace cars with lower emissions and lower petrol consumption.”There has been a noticeable shift in the new car market,” said SMMT chief executive Christopher Macgowan.”This is partly due to concerns about motoring costs and partly because reducing their climate change impact is important to more buyers. However, we should not underplay significant fuel economy and CO2 savings from technological advances in new models, including premium brands,” he added.Many of the cleanest cars are small, so families looking to cut their emissions will have to look for something larger, such as one of the new hybrid vehicles available.
These can cost slightly more upfront, but this extra cost is easily accommodated with carfinance or car loans, allowing you to comfortably do your bit for the environment.

 Even while most big consumer finance marketers, as well as any automaker will tell you that just about 17-18% of all cars are bought on cash, almost a third, 31.4%, of the 10 million-odd car owners in India say they bought theirs on hard cash. The dichotomy in the two set of figures is explained by the typical behaviour of consumers here, for all those who paid most of their vehicle cost in cash report it as cash transaction even while they may have gone in for financing the remainder sum. In this concluding part of a three-part series, ET presents an exclusive peek into consumer financing area of the Indian car market through the prism of the biggest ever car market survey done by NCAER for Maruti Udyog, covering around 4,50,000 households across 342 cities/towns and 1,976 villages across the country.

But first, in keeping with the unique nature of consumer price-gap funding model in the car market, a qualification here: Cash down means where the consumer paid majority in cash, for cash down and finance options, it seems are not mutually exclusive in this market! Up front cash figures apart, share of structured bank and financial institution finance in new car purchase is on the rise, moving from a low under 40% pre-2000 to around 60% post 2004. Countrywide aggregates, however, as most marketers will tell you, conceal more than they reveal, for the real story is in huge variations in car financing options across different regions of the country. Almost two in every five cars sold in north India, for instance, is still bought (predominantly) on cash, even though it has come down from a high of 84% just about six-seven years ago. In comparison, in supposedly conservative south India, three of every four new cars are bought on finance. In one sense, these figures on car financing options reveal how much we have changed, and yet, stark consumption differences across geography remain the hallmark of the Indian consumer market.

Across the regions, buying behaviour shows stark variations when its comes to cash-down purchase or finance options. As high as 44.6% vehicles are bought on cash in the north, followed by bank finance (42.5%), with the proportions in the west are 42.5% and 48%, respectively. Analysts attribute the behaviour to two factors — high agriculture incomes in the north Indian states such as Punjab, Haryana and Uttaranchal and the region being the largest car market in the country. For instance, Delhi alone sells 35% of all the cars sold in India. “Such high farm incomes doesn’t hold true for states in the south. Moreover, south Indians put their cash in more traditional assets such as gold instead of items like automobiles,” says Sachin Khandelwal, GM, ICICI Bank and an old auto finance hand.

Loans on car purchases will get dearer with official rack rates touching 13%, up from 12.5% last month, forcing financiers to shift to floating interest rates. India’s biggest bank SBI has stopped offering fixed rates on car loans while the second largest player, ICICI continues to offer both the products. However, rack rates are being toned down through dealer discounts and freebies. The hike seems to have little impact on car sales which continues to record a 20% growth since April. Total car sales stood at 2.4 lakh units during April-June ’06. TS Bhattacharya, managing director of SBI, said the bank is not offering any fixed loan on its four-wheeler portfolio. Intense pressure on profit margins have led to the rate hike, industry officials said. Interest rates are the highest in the last five years after consistently moving up in recent months.

 Car financiers say the impact on consumers may not be so bad, thanks to heavy discounts from car makers as well as dealers. A top ICICI Bank official said consumers are being offered options to manage costs in a rising interest rate regime. “We are not worried about an impact on volumes which continues to be fairly upbeat this year,” he said. Rising interest rates on consumer loans are clearly an impact of the overall hardening interest rate regime and high borrowing costs. The ‘B’ segment comprising Indica, Alto, Swift and Santro continue to be the fastest movers, constituting about 60% of the total industry sales. Other fast movers include Honda City, Maruti Esteem, Chevrolet Optra and Toyota Corolla in the mid-sized segment. Pankaj Desai, head (retail assets) of Kotak Mahindra Primus, said severe pressure on margins has forced the industry to up rates. “Car sales continue to be quite robust and we do not expect any negative impact of the hike,” he said. Fierce competition had led to car finance rates crashing to as low as 5% last year.

Citibank, the pioneer in the domestic auto loan market, has lost its Number One slot to ICICI Bank (ICBK.BO, news) . ICICI Bank had already overtaken Citibank in terms of credit cards issued. Citi’s share in the auto loan market has dropped from 27 per cent in the late `90s, when it was the leader, to less than 8 per cent now. In 2003-04, ICICI Bank had a 29.2 per cent share of the auto loans market, according to data sourced from Crisil (CRSL.BO, news) Research and Information Services. Its share has increased from less than 10 per cent in the late 1990s.

Similar is the growth story of HDFC Bank (HDBK.BO, news) whose share has more than doubled to 11 per cent. Citibank country business manager - global consumer group, Sarvesh Sarup, told Business Standard: “Citibank’s market share has fallen from 27 per cent few years ago to a single digit now. We are still in the market only to ensure the space is not vacated for the competition.” On why Citibank was still offering auto loans, Sarup said: “We are in the business for the benefit of car dealers and customers.” He admitted that Citibank was making losses in the business. Banking sources said margins have fallen to ridiculously low levels and this has not only prevented new players from entering the market, but also caused decimation of strong competition. ICICI Bank has successfully knocked out competition through predatory pricing. The total outstanding auto loan book at the end of March 2004 was Rs 34,100 crore and is expected to have risen to Rs 43,780 crore at the end of March 2005. The total disbursements in 2003-04 were Rs 22,700 crore and are estimated to have risen to Rs 26,700 crore in 2004-05. The new auto finance market has increased at a compounded annual growth rate of 25.7 per cent from 1998-99 to 2003-04. Hongkong and Shanghai Banking Corporation (HSBC) ended arrangements for car loans at automobile showrooms over a year ago and Standard Chartered Bank followed it late last year. An HSBC official said car buyers normally prefer to complete loan documentation at the car dealership itself, not wanting to take the pains of going elsewhere in search of the right loan package. HSBC still offers new car loans at its branch offices, but there are hardly any takers for this. IDBI Bank (IDBK.BO, news) is keen on entering the car loan market, but “negligible” margins have delayed its foray. An IDBI Bank official said “If we lend Rs 1,000 crore in new car finance market and Rs 250 crore in two-wheeler financing, the amount of interest income that we will earn will be the same.” In 2003-04, ICICI Bank disbursed Rs 7,200 crore of auto loans, HDFC Bank Rs 2,700 crore, Standard Chartered Bank Rs 2,200 crore and Citibank Rs 2,000 crore.

Standard Chartered, India’s largest international Bank, hassecuritised a portion of its portfolio of car loans by way of issue of Senior Pass Through Certificates (PTCs) aggregating INR 105.72 crores. The PTCs have been issued byMumbai Auto Receivables Trust 2003 - Series I (the Trust), a special purpose trust settledby UTI Bank Limited. The auto loan receivables are all originated by Standard CharteredBank. Standard Chartered will continue to act as servicer for these auto loans. This is the   first asset-backed issuance by Standard Chartered Bank in the Indian market and demonstrates the Bank’s expanded focus on securitisation globally and expanding businessprofile in India. This issue is intended to be the first in a programme of such transactions byStandard Chartered Bank.The Trust raised the funds through issuance of two series Senior PTCs, Class A1 PTCsrated P1+(so) by Crisil for INR 42.4 crores and Class A2 PTCs rated AAA(so) by CRISILfor INR 63.3 crores respectively. The ratings are based on the strength of cash flows fromthe selected pool of car loan contracts, the strength of Standard Chartered as the originatorand servicing agent, the credit enhancement in the form of cash collateral and the paymentmechanism which has been designed to ensure full and timely payment. The creditenhancement required for this transaction is in the form of a cash collateral of Rs. 8.43crores. UTI Bank Limited shall function as an independent Trustee.In addition to originating the assets, Standard Chartered acted as the sole arranger for boththe Class A1 and the Class A2 PTCs.The issue opened on June 25, 2003 and received excellent investor response from several mutual funds and was fully subscribed within two days of being in the market.

Originator Profile

Standard Chartered Bank has one of the largest auto loan portfolios in India, at a bookvalue of Rs.1,600 crores. The portfolio is distributed across 34 cities, with a large portion ofit being concentrated in the major metros. The car loan portfolio has grown significantlyover the last three years. The growth in the portfolio size is supported by high underwritingstandards and adequate collection infrastructure. The underlying assets for the assetbacked securitisation programme are auto loan receivables from a pool of 4,630 loancontracts with cash flows totaling Rs. 113.36 Crore spread over a remaining final tenure of35 months and a weighted average tenure of 33.1 months. The pool has a weighted
average seasoning of 7 months as of June 30, 2003.

The country’s largest lender, the State Bank of India (SBI) on Wednesday said it will shortly raise car and other personal loan rates, excluding housing and education, by an average of 0.75 per cent. We have announced hike in benchmark prime lending rates by 75 basis points…Consequently, we will be raising rates of all (personal) loans, except for housing and education, by 75 basis points on an average, SBI MD Ashok Aggarwal told reporters on the sidelines of the launch of electronic system for excise and service taxes. He, however, clarified that some loan rates may rise by one per cent and some by 0.50 per cent, but the average would be 0.75 per cent. The interest rate hike would be announced in a few days, he added. Aggarwal’s statement came amid reports that icici and kotak are increasing auto interest rates by 0.75-1 per cent this weekend. Pursuant to increase in cash reserve ratio by the reserve bank, sbi had announced 0.75 per cent in its benchmark prime lending rate to 12.25 per cent last month. However, all the existing housing and educational loans as well as new educational loans up to rs 4 lakh are excluded from the hike. Similarly, all the existing and future agriculture production loans less than rs three lakh are excluded from its impact. Sbi had also raised interest rates on some of its deposit schemes.

Morgan Stanley Real Estate announced today that it has successfully completed fundraising for MSREF VI International with a total of $8.0 billion of equity commitments from institutional and retail investors in North America, Europe, the Middle East and Asia. Morgan Stanley invested just over 20 percent of the total equity raised. The Fund employs an enhanced return strategy and has buying power in excess of $30.0 billion. Investments include non-U.S. real estate assets, portfolios and companies primarily in developed markets, including Japan, Western Europe, and Australia, and emerging markets, including China, India, Russia, Turkey and Latin America.The record size of this fund, both for Morgan Stanley Real Estate and among real estate investment managers, is indicative of strong capital flows into real estate as new investors seek exposure to the asset class and existing investors increase their allocations,” said John Carrafiell, Managing Director and Global Co-Head of Morgan Stanley Real Estate Investing. “Real estate is increasingly becoming an important component of an asset allocation strategy because it offers portfolio diversification and the ability to invest in ‘real’ assets, which provide uncorrelated investment returns compared to other asset classes

RAMS Home Loans, an Australian mortgage lender, plans to raise about A$700 million ($593 million) in an initial public offering (IPO) by selling about 80 percent of the company The decision to float the company comes after several months of efforts to sell it outright to private equity investors, with RAMS founder John Kinghorn and sale adviser UBS looking for up to A$1 billion. The source, who declined to be named, said a prospectus is expected to be filed later this week, with Kinghorn expected to retain at least a 20 percent stake in the company following the offer. RAMS, which stands for Registered Australian Mortgage Securities, has an enterprise value of about A$1 billion. Enterprise value includes debt, and based on the IPO estimates RAMS would have about A$125 million in debt. Kinghorn, who started the business some 16 years ago to take on the big banks, appointed UBS in late 2006 to sell the business.

New Mexico Gov. Bill Richardson will speak at a groundbreaking ceremony today for a new studio for Sony Pictures Imageworks, the digital effects and animation arm of Sony Pictures Entertainment. The 100,000-square-foot facility will be located in Mesa del Sol, a master-planned community development south of the Albuquerque International Sunport. The studio is expected to initially create 100 new jobs. Imageworks has done work on films like “The Chronicles of Narnia: The Lion, the Witch and the Wardrobe” and “Monster House.” Its first feature film, the animated “Open Season,” was released in 2006. The groundbreaking ceremony will take place this afternoon at Albuquerque Studios in Mesa del Sol, 5650 University Blvd. SE.