THERE was some sense of satisfaction when Deepak Parekh, chairman of India’s oldest mortgage player, HDFC, noted that the average loan size of his company had risen from ₹27 lakh to ₹29.5 lakh in fiscal year 2020-21, also known as the year of the pandemic.
Demand continues to be strong
Parekh’s optimism stems from the fact that a ‘roof over one’s head’ is the most cherished dream for almost all Indians, irrespective of their economic standing.
The annual report of HDFC for fiscal year 2020-21 bears this out.
Disbursements of home loans (in case of individual borrowers) grew by 3% despite the first half of fiscal 2020-21 witnessing a drop of 35%.
In fact, home loan disbursements at HDFC were up only 37% year on year during the first quarter ended June. It jumped to 95% in the September 2020 quarter and witnessed year on year growth of 126% and 160% in the December 2020 and March 2021 quarter (the reason is explained under Governments also chip in later in this narrative).
What changed in the year of the pandemic?
Parekh said that affordability of loans for borrowers improved to a 25-year high in fiscal year 2020-21. The annual income of borrowers rose from ₹15 lakh to ₹16 lakh even as the property prices continue to rule at levels seen in fiscal year 2017-18.
And Parekh is not the only one who is seeing this rise in demand. Even the country’s biggest bank, State Bank of India saw a 10.51% year on year rise in its home loan portfolio in fiscal 2020-21.
Recognising the leader
Obviously HDFC’s role as a home loan pioneer continues to be recognised. The Maharashtra Housing & Area Development Authority (MHADA) for instance has designated HDFC as the most-favoured lender as MHADA ventures into affordable housing.
Statistics indicate that close to 80% of HDFC’s eight million customers fall in the affordable home segment (where the cost is less than ₹45 lakh).
Governments also chip in
Various state governments also realised that there must be fiscal support given to the housing sector. That explains the reason why the stamp duty rate was slashed in Maharashtra (till December 2020) which actually boosted sales across the board!
A similar move has also been undertaken by the Karnataka government for fiscal year 2021-22 where in stamp duty has been cut to 3% from the earlier 5%. This again relates to homes costing ₹35 lakh to ₹45 lakh.
And the show continues
There are early indications that despite the second wave, home loan demand continues to be robust. The latest RBI Bulletin, indicates that while as of May 2021, this segment witnessed a growth of only 0.2% in the ongoing fiscal, it had registered a healthy 10.1% growth.
A new trend
While across major markets one is seeing unsold inventory, there has been strong demand coming in from the affordable housing segment.
This segment is defined as homes costing maximum of ₹45 lakh is seeing a lot of traction across major markets.
“The demand for affordable homes is certainly on the rise. Additionally we are also seeing the mid-segment demand reviving in markets like Bengaluru,” says the CEO of a prominent developer.
The mid-segment caters to homes costing ₹75 lakh to ₹1 crore. So long as the demand for housing continues, banks will continue to see demand for home loans.