According to data from the Reserve Bank of India (RBI) on ‘Sectoral Deployment of Bank Credit’, outstanding credit in the housing sector in India has increased by nearly Rs 10 lakh crore in the last two fiscal years. As of March 2024, the credit outstanding in the housing sector stood at a record Rs 27.23 lakh crore. This growth can be attributed to the strong revival of the residential property market following the COVID-19 pandemic, driven by pent-up demand.
Growth in Housing Credit and Real Estate Market Revival
The data from RBI shows that credit outstanding to the housing sector, including priority sector housing, has increased from Rs 19.88 lakh crore in March 2023 to Rs 27.22 lakh crore in March 2024. In March 2022, the credit outstanding was Rs 17.26 lakh crore. Additionally, credit outstanding towards commercial real estate stood at Rs 4.48 lakh crore in March 2024, compared to Rs 2.97 lakh crore in March 2022.
Experts from the banking and real estate sectors attribute this growth to the housing boom seen across all segments, with a particular emphasis on the affordable housing segment. They also mention the pent-up demand for buying homes in the last two years following the COVID-19 pandemic.
Factors Driving the Growth
Madan Sabnavis, Chief Economist with Bank of Baroda, highlights the government’s push for affordable housing as a key factor driving the high growth in home loans. He also mentions that the growth rate of home loans might taper down due to a higher base, but the segment is expected to remain robust.
Samir Jasuja, CEO and MD of PropEquity, a real estate data and analytics company, points out that the rise in housing loans outstanding is primarily due to the significant increase in the number of properties launched and sold in the last two fiscal years. He explains that major Tier-1 cities have witnessed high rates of price appreciation, contributing to an increase in the average loan size per property.
Strong Demand for Residential Real Estate
The demand for residential real estate in India has remained strong since 2022, after a period of subdued sales and stable prices that lasted for over a decade. The sector suffered from disruptions caused by the new realty law RERA, GST, and demonetization, which resulted in a trust deficit. However, the sector bounced back following the COVID-19 pandemic as the importance of home ownership was emphasized.
Industry experts believe that the Indian real estate sector, which supports more than 200 ancillary industries, including cement and steel, will reach a milestone of USD 1 trillion by 2030.
Expectations and Outlook
Karthik Srinivasan, Senior Vice President and Group Head at rating agency ICRA, notes that retail housing loans deployed by banks have significantly increased in FY’24 due to the merger of Housing Development Finance Corporation Ltd (HDFC) with HDFC Bank. He expects housing finance to grow by 12-14 percent annually in the near-to-medium term, supported by buoyant demand.
Aakash Ohri, Jt Managing Director of DLF Home Developers, highlights the unprecedented surge in demand for homes in the past two years, especially in the aftermath of COVID-19. He emphasizes the shift in people’s perception of homeownership and the value of having a place to call home. Ohri attributes the growth in home loan advances to favorable government policies, attractive financing options, and the growing aspirations of the populace for homeownership.
Mohit Jain, Managing Director of Krisumi Corporation, mentions the surge in demand for spacious homes with dedicated workspaces and outdoor spaces. He believes that the long-term outlook for the housing market remains strong, leading to strong growth in home loans.
Realtors’ Demands for Housing Boost
To further boost housing demand, real estate industry bodies CREDAI and NAREDCO have been urging the government to increase tax incentives on home loans. They propose enhancing the deduction allowed on payment of interest on home loans from the current Rs 2 lakh to Rs 5 lakh.
Overall, the housing sector in India has experienced significant growth in credit outstanding, driven by a revival in the real estate market and increased demand for residential properties. The sector is expected to continue its upward trend, supported by favorable government policies and strong aspirations for homeownership.
