Shaurya Loans

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India’s Home Loan Market, Currently Valued at About ₹24 Lakh Crore, is Expected to Double in the Next Five Years. The Growth in Loans Disbursed Was Primarily in Non-metropolitan Areas. When Compared With Tier-1 and Tier-2 Districts.

Indian Home Loan Market is Expanding; Likely to Double in the Next Five Years.
The latest RBI survey shows that household inflation expectations eased by 80 bps to 9.3 percent.

Even in a Rising Interest-rate Environment, Housing Loans Continue to Improve. The Share of Housing Loans in Bank Credit Increased to 14.4 Per Cent in June From 13.1 Per Cent in March 2020, With the Maximum Number of Disbursements in Tier-3 and Tier-4 Cities, Quoting an SBI Report.

The growth in loans disbursed was primarily in non-metropolitan areas. When compared with Tier-1 and Tier-2 districts, the total home loan portfolio grew by more than 10 per cent in Tier-3 and Tier-4 areas in FY22.

The report noted that the growth of loans in the ₹30-50 lakh and the ₹50-100 lakh brackets were higher in Tier-3 areas than in Tier-1 districts.

Further, the report said that India’s home loan market, currently valued at about ₹24 lakh crore, is expected to double in the next five years, mirroring the overall trend in the country’s aspirations to become a $5 trillion economy.

Meanwhile, construction accounts for between 5% and 6% of the country’s overall gross domestic product, as per reports. In terms of employment generation, it is considered the second largest after agriculture. Moreover, this sector is intertwined with the entire supply chain network, from the manufacture and sale of cement, steel, raw materials, and labour to the completion of end-use projects. Any increase in the housing market will stimulate economic growth.

So far this year, the Reserve Bank of India has raised interest rates by 140 basis points, to 5.40%. According to analysts, the fear of further rate hikes and the loss of the ability to purchase properties will drive customers to invest in real estate.

Disbursal of housing loans rose significantly in the April-June quarter and contributed almost half of the total personal and retail loans disbursed, according to SBI’s data.

SBI, PNB Housing Finance, and Bank of Baroda are among those that recorded significant growth in their home loan portfolios, according to their latest quarterly results.

The latest RBI survey shows that household inflation expectations eased by 80 bps to 9.3 per cent. Further, for the three months and one year ahead, median inflation expectations also declined by 50 bps and 60 bps, respectively, from the May 2022 round of the survey.

Construction costs are easing

Since the start of the Russian-Ukraine war, construction costs have gone up due to the rise in raw materials, from steel to cement and from aluminium to paint. Real estate developers also expressed concern about rising input costs between March and May.

For instance, prices of domestic hot-rolled coil (HRC) surged to ₹76,000 per tonne in April 2022 from ₹39,200 per tonne in March 2020.

But, in May, the government lowered duties on some steel raw materials, levied charges on steel product exports and took measures to improve cement availability, which has helped to ease pressure on commodities like steel and cement.

HRC prices are currently in the range of ₹58,000–59,000 per tonne, which is among the lowest so far in 2022 and a more than 25% drop from the peak they commanded earlier this year, according to media reports.

The views and recommendations made above are those of individual analysts or broking companies, and not of Shaurya Loans.


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