Outstanding loans for housing have grown substantially over the past two years, according to RBI data. Housing credit increased nearly INR 10 lakh crore between FY22-FY24 to reach a record high of INR 27.23 lakh crore in March 2024. This growth can be attributed to pent-up demand during the pandemic and rising sales across segments. The government's push for affordable housing has increased accessibility. Reports show price appreciation of 50-100% in major cities over the past two years, leading to larger average loan sizes. Commercial real estate lending has also risen significantly from INR 2.97 lakh crore to INR 4.48 lakh crore between March 2022-2024.
The amount of money owed on housing loans in India has grown substantially over the past two years, according to Reserve Bank of India's (RBI) data on 'Sectoral Deployment of Bank Credit'. Outstanding credit to the housing sector increased by nearly INR 10 lakh crore in the last two fiscal years, reaching a record high of INR 27.23 lakh crore in March 2024.
This growth can be attributed to several factors. Experts say there was pent-up demand as people who delayed home purchases during the pandemic are now actively buying. The government's push for affordable housing has also increased accessibility. Reports show rising sales and prices across all segments, especially affordable housing.
According to the BankBazaar Aspiration Index, in 2023, home ownership continued to be one of the top three goals. The demand for home loans continued its upward trajectory despite higher interest rates, and the loan book of banks grew above INR 21 lakh crore. In 2023 -- the average home loan ticket size disbursed on Bankbazaar was INR 28.19 lakh. For metros, the average home loan ticket size was INR 33.10 lakh, and for non-metros, it was INR 22.81 lakh.
The pandemic highlighted the importance of homeownership, driving demand for larger homes with dedicated workspaces. Commercial real estate lending has also risen substantially, with outstanding loans up from INR 2.97 lakh crore in March 2022 to INR 4.48 lakh crore in March 2024.
The real estate sector in India has seen significant growth over the past few years after struggling for more than a decade. The pandemic highlighted the importance of home ownership and shifted priorities towards larger homes with dedicated workspaces. As a result, housing demand has surged across all segments.
According to data from the Reserve Bank of India, outstanding loans for commercial real estate grew from INR 2.97 lakh crore in March 2022 to INR 4.48 lakh crore in March 2024 - an increase of INR 1.5 lakh crore. This suggests businesses are borrowing more to invest in commercial properties. Property consultants have also reported a major rise in housing sales and prices over the last two financial years.
Madan Sabnavis, Chief Economist at Bank of Baroda, attributed the high growth in home loans to the ongoing housing boom. Commenting on the RBI data, Samir Jasuja, CEO of PropEquity, said the increase in housing loans outstanding is primarily due to a significant rise in new project launches and property sales over the past two fiscal years. Major Tier-1 cities have witnessed high price appreciation of 50-100% since FY2021, contributing to larger average loan sizes. Jasuja expects demand to remain strong.
The real estate sector had suffered in the past due to disruptions from RERA, GST, demonetization and undelivered projects. However, it bounced back post-COVID as the pandemic underscored the need for home ownership. Industry experts believe the sector will reach USD 1 trillion by 2030.
Karthik Srinivasan from ICRA noted retail housing loans deployed by banks increased in FY2024 after HDFC's merger with HDFC Bank. Mortgage penetration is rising but remains lower than developed nations, implying scope for further growth. ICRA expects 12-14% annual growth in housing finance backed by demand.
Aakash Ohri from DLF and Mohit Jain from Krisumi Corporation agreed demand has peaked in the last two years with buyers prioritizing larger homes and workspaces. Jain said demand and home loan growth are likely to remain strong given the positive long-term outlook.
Experts say housing loan growth will remain robust at 15-20% annually but may taper due to the higher base. The long-term outlook is strong as demand remains buoyant, supported by favourable policies, financing options and growing aspirations for homeownership.
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