Hit by economic slowdown and dip in customers repayment capability, ICICI Home Finance Company, subsidiary of ICICI Bank, reported about 3.5 fold growth in its non-performing assets at Rs 161.43 crore at end of September 2009 from Rs 36.03 crore a year ago.

NPAs, after provisions, stood at Rs 127.14 crore at end of September 2009 up from Rs 23.92 crore at the end of September 2008.

In per cent terms, ICICI Home Finance Company’s gross NPAs rose to 1.34 per cent at end September 2009 from 0.31 per cent a year ago, according to information filed with Bombay Stock Exchange (BSE) on Monday.

Company’s net profit for the six months ended September 2009 rose to Rs 54.36 crore from Rs 39.03 crore at end of September 2008. The total income rose to Rs 800.89 crore from Rs 647.41 crore.

Its outstanding loan book as on September 2009 stood at Rs 12,004 crore, up from Rs 11,114 crore at end of March 2009.

In response to query on incidence of rise in NPAs, ICICI HFC spokesperson said the NPA ratio in the last two quarters have remained stable with improving collections and economic outlook. The company did not elaborate on the reasons for rise in bad loans (NPAs).

An analyst with private broking house said the downturn in the economy had hit the business growth and incomes of housing finance companies. The higher interest rates (read high monthly installment) also adversely affected the repayment capability of clients, which possibly led to jump in loan defaults.

The loan delinquency as per cent of outstanding portfolio for the housing sector was around 1 per cent. In case of some aggressive home finance institutions it was around 2 per cent, analyst said.

LIC Housing Finance, its ICICI HFC’s competitor, reported drop in its gross Non Performing Assets recorded 1.85 per cent as on September 2008 to 1.28 per cent as of September 2009. The Net NPAs of the Company declined from 0.87 per cent as of September 2008 to 0.62 per cent as of September 2009.

Analyst with rating agency said there was a definite improvement in the job market on signs of economic recovery. Plus, the interest rate on home loans has declined by at least 150 basis points in last 12 months. This translates into lower monthly repayment burden. The further addition to defaults in expected to slowdown in the coming months.

“The company has been witnessing healthy growth in the home loan segment and home loans will continue to be one of the focus areas for the company”, ICICI HFC spokesperson said.

Any individual who is planning to take a home loan should be familiar with the terminology that home loan financer as well as the loan agreement mentioned. An understanding of such terms makes a home loan deal clear in the mind of the individual/ loan seekers (borrower). Here are some terms that one must know while you go for a search of home loan.

The Banks do not finance you the entire amount of the housing property, they will finance you for 80% – 90% of the loan amount & the remaining amount has to come from the pockets of the borrower.

Once you decide to avail a home loan, the very next thing that comes in your mind after filling up the application form is that choosing between fixed and floating rate of interest here is the time when you put yourself in a 50-50 situation.

Whatever the Rate of Interest may be the EMI (Equated Monthly Installment) is the impact, So you opt for a fixed home loan rate and the bankers advise us to go for the same.We assume that once you select fixed rate plan for yourself the rate of interest will remain unchanged over the entire tenure of the repayment period irrespective of any subsequent increase in the same. But actually this is not the case.

Here is the nature of fixed interest rate for housing loan so that you could make a proper decision over the matter.

All the banks include the reset clause on fixed interest rate in their home purchase loan agreement papers. So for example if you had taken the loan @ 10.5 per cent for 15 years it does not mean that the same rate will be applicable all across the tenure.

India’s housing finance companies & banks has introduced a clause as per which it has right to revise the fixed rate home loan after two years & can also revise the rates after 5-years of disbursing the loan.