The housing sector in India has witnessed a massive surge in credit outstanding, reaching a record ₹27.23 lakh crore in March 2024, as per the Reserve Bank of India’s (RBI) data on the ‘Sectoral Deployment of Bank Credit’. This increase, amounting to nearly ₹10 lakh crore over the past two fiscal years, has been attributed to the strong revival in the residential property market following the COVID-19 pandemic.
Surge in Housing Credit Outstanding
According to RBI’s data, the credit outstanding to housing (including priority sector housing) stood at ₹27,22,720 crore in March 2024. This represents a significant increase from ₹19,88,532 crore in March 2023 and ₹17,26,697 crore in March 2022.
Credit Outstanding Comparison (₹ in crore)
| Year | Housing Sector Credit Outstanding | Commercial Real Estate Credit Outstanding |
|---|---|---|
| March 2024 | ₹27,22,720 | ₹4,48,145 |
| March 2023 | ₹19,88,532 | Data Not Available |
| March 2022 | ₹17,26,697 | ₹2,97,231 |
This sharp increase can be attributed to various factors, including pent-up demand post-pandemic and a booming real estate market.
Factors Contributing to Growth
Banking and real estate experts have pointed out that the rise in housing credit is primarily due to a combination of factors:
- Post-Pandemic Demand: The COVID-19 pandemic led to an increase in demand for homeownership, with people realizing the importance of having a home.
- Government Push for Affordable Housing: According to Madan Sabnavis, Chief Economist at Bank of Baroda, the government’s initiatives in affordable housing have played a significant role in boosting the sector.
- Increased Housing Sales: According to Samir Jasuja, CEO of PropEquity, Tier-1 cities have witnessed price appreciation ranging from 50-100% since FY 2021. This has resulted in larger average loan sizes per property.
Commercial Real Estate on the Rise
The RBI data also revealed an increase in credit outstanding towards commercial real estate, reaching ₹4,48,145 crore in March 2024, compared to ₹2,97,231 crore in March 2022. The recovery in both residential and commercial real estate sectors has contributed to the robust growth in credit deployment.
Real Estate Sector Revival
The Indian real estate sector, which supports over 200 ancillary industries like cement and steel, has seen a significant revival since 2022 after languishing for over a decade. Disruptions caused by various factors, including the implementation of new regulations like the Real Estate Regulatory Authority (RERA), Goods and Services Tax (GST), and demonetization, had initially dampened the sector’s growth.
However, the post-COVID era has marked a turning point. According to Wikipedia, the pandemic reinforced the importance of homeownership, which led to a sharp increase in demand for residential properties. This increased demand has been reflected in the growth of home loan advances.
Long-Term Outlook for the Housing Sector
Industry experts believe that the housing sector is in the early stages of a long-term upcycle. The real estate sector is expected to reach the $1 trillion mark by 2030, as per industry projections. A key factor in this growth is the increasing mortgage penetration in India, which stood at around 12% of the GDP as of March 2024. Karthik Srinivasan, Senior Vice President at ICRA, believes that while this is lower than in developed economies, it signifies a tremendous growth opportunity in the Indian housing market.
Projected Growth in Housing Finance
- Annual Growth Rate: Housing finance is expected to grow by 12-14% annually in the near-to-medium term, according to ICRA.
- Mortgage Penetration: As mortgage penetration increases, banks and financial institutions are expected to see sustained growth in housing loans.
Key Insights from Industry Leaders
1. Madan Sabnavis, Chief Economist, Bank of Baroda
- The housing boom is driving high growth in home loans across all segments.
- Affordable housing is witnessing significant uptake due to government initiatives.
- Growth in home loans may taper to 15-20% due to the higher base.
2. Samir Jasuja, CEO, PropEquity
- Housing loans are rising due to the significant volume of property launches and sales in the last two fiscal years.
- Major cities have seen high price appreciation, driving larger loans.
3. Karthik Srinivasan, Senior VP, ICRA
- Housing loans have surged post the HDFC-HDFC Bank merger in July 2023.
- Mortgage penetration is rising, but there’s still room for growth compared to global standards.
4. Aakash Ohri, Joint MD, DLF Home Developers
- Demand for homes has surged to an all-time high due to a shift in perceptions about homeownership.
- Residential real estate has become an attractive investment opportunity.
5. Mohit Jain, MD, Krisumi Corporation
- Buyers are increasingly looking for spacious homes with dedicated workspaces.
- Modern homeowners are prioritizing features like home offices and outdoor spaces.
Future Prospects and Government Role
With the housing sector in a strong upcycle, real estate bodies like CREDAI and NAREDCO are pushing for further government incentives. They are advocating for increased tax deductions on home loan interest payments, suggesting a raise from the current ₹2 lakh to ₹5 lakh. This, they believe, will further drive demand for housing.
The long-term outlook for the sector remains strong, with robust demand for homes, continued growth in home loans, and government support all playing pivotal roles.
Conclusion
India’s housing sector is witnessing unprecedented growth, driven by a confluence of factors including pent-up demand, government policies, and the increasing importance of homeownership post-COVID. The long-term outlook remains positive, with industry experts predicting sustained growth in both residential and commercial real estate segments. As the sector moves towards reaching the $1 trillion milestone by 2030, the housing credit market will likely continue its upward trajectory, bolstered by rising mortgage penetration and favorable economic conditions.
