HSBC to step up home loan activity in India

HSBC will step up mortgage lending in India after keeping to the sidelines for the past 18 months. The bank also plans a cautious resumption of growth in consumer finance after unsecured loans soured across the industry, the global bank's country chief executive said in Mumbai on Thursday.

Stuart Davis, who was appointed to his new position in April, after heading the London-based lender's Australian operations, said the bank was seeing signs of increased loan demand in India, although the basis for that demand remains unclear.

Indian homebuyers are returning to the market after more than a year of subdued activity, lured by a 25-40 per cent drop in prices. Demand has also been spurred by smaller projects that have raised affordability.

"We're keen to not only get back to our previous levels but expand that quite strongly," said Davis. "The property market is more balanced, the supply and demand equation and the affordability is much more balanced than what it was two years ago, when on the back of the boom conditions prices of property went ahead of themselves."

HSBC's India business saw a 46 per cent drop in net profit for the first half of 2009 to $201 million, as losses on retail lending more than doubled to $124 million. HSBC discontinued consumer finance loan origination in India towards the end of last year.

Bank loan growth is averaging just above 15 per cent this year, compared with 27 per cent in late 2008 and 30 per cent in the year through March 2008, after companies hit by the global financial crisis slowed expansion and banks curbed retail lending to rein in bad debts.