According to the Reserve Bank of India's latest data, aggregate home loans by commercial banks rose 21% to Rs 3,64,170 crore as of end August 2011 from Rs 3,00,929 crore in March 2010. In the current year, much of the growth in bank credit has been driven by home loans.

While total bank loans have risen 20.2% year-on-year (YoY) as of August 26, 2011 against 19.3% in the previous year, home loans rose 15.3% in the same period compared to 10.9% in the previous period. The RBI has raised its key policy rates by 300 basis points (one basis point is 0.01%) in the same period.

Though home loan rates do not necessarily move at the same rate as the central bank signals, individual banks' lending may vary by some margin. It is reckoned that on an average home loan rates have gone up by around 200 basis points. Most banks charge 13-13.5% interest for fixed-rate home loans. "The growth is largely coming from tier-II and tier-III centres," said Keki Mistry, vice-chairman and managing director, HDFC.

Some lenders are also offering products to suit customer requirements that is partially contributing to the rise in loans. "We have also launched a fixed-rate product as there was a demand from customers who wanted to buy homes but were scared of the constant rise in interest rates," he added. In recent years, most of the borrowing is on a floating-rate basis.

Under this route, whenever borrowing rates change, the equated monthly instalments (EMI) also change, but the tenure changes accordingly. Customers who were worried that EMI keeps moving up and down, are now exploring fixed-rate products.

"We are witnessing high demand for fixed-rate products, which is why we launched our new fixed rate product," said Jairam Sridharan, senior vice-president, head consumer lending and payments at Axis Bank, which launched a lifetime fixed home loans product last week. ICICI Bank and HDFC have also come out with limited period, fixed rate products.

Another possible explanation offered by banks is that some borrowers have started drawing on their unutilized limits, which has pushed up the loan figures. "The increase in home loan disbursements could be largely on account of the past approvals. Customers avail of disbursements with a lag, hence this is part of the old pipeline," said the home loan head of a private bank.

"We would have to wait a week to see if fresh demand comes, as the festive season is on the anvil. Many developers have launched a series of freebies and discounts to woe customers,'' he added.