It is estimated that the long-term debt requirement in the residential market itself will amount to nearly INR 430,000 crore till 2026. Furthermore, India’s real estate construction market, comprising other asset classes like Grade A commercial offices, high-quality malls, warehousing parks, and data centres, is collectively predicted to experience a 35-40% growth trajectory over the same period. This equates to an overall estimated potential of INR 550,000 – 600,000 crore.

Construction finance in India is dominated by the residential sector, accounting for approximately 70% of the market. However, there is still a significant gap between the total residential construction debt requirement and the debt that has been sanctioned, indicating the underserved potential of the market. Given strong fundamentals and a significant need for long-term debt in construction finance, the current gap between sanctioned and market debt stands at ~INR 150,000 crore.

Additionally, the LRD market in the commercial segment is expected to exceed a value of INR 800,000 crore by 2026. With strong demand fundamentals and sustainability measures in place, the LRD potential in the commercial office segment alone is expected to grow by 30% in the next three years. Furthermore, the physical retail market and other rent-yielding assets such as warehousing, data centres, and hotels present substantial opportunities for lenders in the Lease Rent Discounting (LRD) segment.

“In India’s thriving real estate sector, lenders have a golden opportunity to capitalize on the momentum. Recent transformations, like RERA, GST, and REITs, have opened doors for increased lender participation. Last year, Public and Private sector banks accounted for 68% of total debt sanctioned, highlighting growing confidence and interest. The popularity of Lease Rent Discounting (LRD) in commercial real estate has also grown, constituting an average of 19% of total debt sanctions, with a notable increase to 25% in 2023. While dominant lenders in the market pose challenges for smaller developers in accessing credit, it also presents an opportunity for new lenders to enter the market and cater to the financing needs of aspiring developers. To support developers at different stages, innovative and customized funding structures are needed, offering a lot of opportunity for AIF. Private credit will continue to play a crucial role, particularly in the residential sector. Shifting focus to smaller developers who make up over 2/3rds of the residential market can make funding more inclusive, ” said Lata Pillai, Senior Managing Director, Capital Markets, India, JLL

The report underscores India’s real estate sector as a pivotal contributor to the country’s GDP growth, predicting significant potential for lenders in this burgeoning market. 

Banks make a strong comeback in India’s RE debt market

Upon analysing the sanctioned debt numbers across the top seven cities, Mumbai, NCR, and Bangalore accounted for 80% of the total debt sanctioned in the last six years, demonstrating their importance in the real estate market. However, challenges such as the IL&FS and NBFC crisis in 2018 and the impact of the pandemic in 2020 caused a slowdown in the debt market. But the resurgence of the real estate markets from 2021 onwards has created new opportunities for lenders and borrowers alike.

The study showed that the banking sector’s participation has increased, accounting for 70% of the total debt sanctioned in 2023, compared to non-banking sectors. Reforms in the real estate sector, such as the Insolvency and Bankruptcy Code (IBC), have instilled confidence among both public and private sector banks.

The dominance of a few large players in debt financing poses challenges for aspiring developers. However, the demand for quality real estate assets and the sector’s projected growth present opportunities for expansion and new players. Private credit providers, such as Alternative Investment Funds (AIFs), can play a crucial role in filling the financing gap and providing tailored solutions to borrowers.

“The real estate sector has witnessed significant growth and transformation from pre-Covid to post-Covid era. As the sector grows from 7.23% of the nation’s GDP to a projected contribution of around 14% by 2030, the sector presents a lucrative opportunity for lenders in the market. Diverse funding sources, including traditional loans, private equity and venture capital, offer flexibility to borrowers in exploring different financing options”, said Raja Seetharaman, Co-founder & Director of Propstack. 

Overall, the Indian real estate market offers tremendous opportunities for lenders, investors, and borrowers. With the sector’s rapid growth and the availability of diverse financing options, it is crucial for stakeholders to leverage these opportunities and drive economic development through strategic debt financing.

Also Read: Good News: Unchanged Repo Rate, no Change in Home Loan interest

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The EMI that you paid last month shall remain the same this month and for next few months.

Here’s what the Repo rate being unchanged means to you from the experts point of view

Boman Irani, President, CREDAI National
As anticipated, the RBI continues to keep the repo rate at 6.5%. However, the Indian real estate industry and the economy at large would have greatly benefitted from a rate cut, given that current macro-economic parameters are favourable and the rate has been maintained at 6.5% for the last 3 quarters. This move will keep home loan rates and cost of buying a house on the higher side for consumers and we hope that it does not disrupt homebuyers’ sentiments. With inflation relatively in check, economy growing at a faster than expected pace, reasonably good monsoon, RBI could have opted for a rate cut that would have provided the ideal opportunity to accelerate housing momentum and overall consumer spending, not just positively impacting growth of real estate but other sectors too.

Anuj Puri, Chairman – ANAROCK Group:
With the fundamentals of the Indian economy remaining strong and the recently announced GDP rates indicating positive outlook, the RBI once again decided to keep the repo rates unchanged. This is an extension of the festive bonanza that RBI gave to the homebuyers in its last policy announcement. It gives homebuyers yet another opportunity to make cost-optimized home purchases. If we consider the present trends, the housing market is on a bull run and unchanged home loan rates will only add to the overall positive consumer sentiments. Additionally, given that housing prices have escalated across the top 7 cities in the last one year, at least the unchanged home loan rates will give some relief to the homebuyers. Going forward, we may expect the momentum in housing sales to continue in the wake of the unchanged repo rates coupled with the resultant stable home loan rates and positive economic outlook on India.

Dharmendra Raichura VP Finance at Ashar Group
The RBI’s decision to keep the repo rate unchanged is a positive move for the real estate sector, ensuring stability in interest rates. The recently revealed Q2 GDP growth rate of 7.6% solidifies India’s status as the world’s fastest-growing major economy. Given that inflation is under control, the market anticipates that the RBI will probably maintain the current REPO rates. This decision brings a welcome period of stability after recent market volatility, providing much-needed support to the real estate sector and fostering sustained growth in the housing market.

Manju Yagnik, Vice Chairperson of Nahar Group and Senior VP, NAREDCO, Maharashtra
The importance of keeping inflation under observation while preserving economic development momentum is reflected in the decision to keep the repo rate at 6.5%. The affordability of house loans has been adversely affected by inflationary pressure, unaffordability, and a lack of new development, all of which have contributed to historically high-interest rates. As a result, demand for affordable housing, a substantial portion of the housing structure, has decreased. To encourage small urban housing, the Indian government has granted an additional interest subsidy of Rs 60,000 crore for residences up to Rs 40 lakh. Furthermore, with the festive tailwind, demand for house loans is anticipated to continue to be strong, indicating a robust increase in property sales.

Also Read: Good News for Homebuyers availing a Home Loan

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The 35 BPS rate hike by the RBI – the fifth consecutive rate hike this year – comes as no surprise. With repo rates now at 6.25%, there may be some repercussions on housing uptake. This hike will undoubtedly push up home loan interest rates, which had already crept up after four consecutive rate hikes this year. However, as long as interest rates remain in single digits (mainly within 9.5%) the impact on housing will at best be moderate. If they breach this point, we will see some real pressure on residential sales volumes in the months to come – especially in the affordable and lower mid-range housing segments.

That said, it bears noting that the Indian housing market remains largely end-user driven. Unlike investors, end-users do not look for the lowest entry point but for the inherent value and benefits of homeownership. As long as end-users continue to significantly outnumber investors, interest rate-driven impacts on housing sales will not be very pronounced.

The impact of the last four consecutive rate hikes early this year was minimal. This was clearly validated by the outstanding performance of the housing sector in the last quarter (Q3 2022). As per ANAROCK Research, as many as 88,230 units were sold across the top 7 cities in Q3 2022, after the three recent rates hikes. Consumer demand remained strong with the sales rising by 4% against the preceding quarter and 41% annually.

Also Read: RBI Monetary Policy – Inevitable Hike Will Make Homes Costlier

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By Varun Singh

When one buys a home they can check the brick and mortar, how big the flat is or not, but don’t know whether the flat is on loan or not.

But now it won’t be the case, before you buy a home you can check whether it’s on loan or not but now you can check.

Recently MahaRERA came out with a circular which has made the builders to submit a report on whether the property they are selling is on loan or not?

The circular states, “Ministry of finance has notified the establishment of Central Registry Securitisation Asset Reconstruction and Security Interest of India (CERSAI), a government company, incorporated for the purpose of operating and maintaining the Central Registry under the provision of the Securitisation and Reconstruction of financial assets and enforcement of security interest act 2002.”

The objective of setting up of central registry is to prevent frauds in loan cases involving multiple lending from different banks on the same immovable property.

Government of India has subsequently issued a gazette notification on January 22, 2016 for filing of the following types of security interest on the CERSAI portal.

a) Particulars of creation, modification or Satisfaction of security interest in immovable property by mortgage Other than mortgage by deposit of title deeds.
b) Particulars of creation, modification or satisfaction faction of security interest in hypothecation of plant and machinery, stocks, deaths including book debts or receivables, whether existing or future.
c) Particulars of creation, modification of satisfaction of security interest in intangible assets being know how, patents, copyright, trademark, license, franchise or any other business or commercial right of similar nature.
d) Particulars of creation, modification of satisfaction of security interest in any under construction residential or commercial or a part thereof by an agreement or instrument other than mortgage.

Whereas, CERSAI had started registration of the data in respect of paragraphs 82C for the security interests created on or after January 22, 2016 with affect from me 25, 2016 for scheduled commercial banks and with effect from July 1, 2016 for all other entities registered with them.

Further, the registration of data in respect of paragraph D has commenced June 8, 2017 for all banks and financial institutions registered with CERSAI.

The MahaRERA circular says that homebuyers and allottees should be aware of such security interest created on real estate projects/apartments which home buyer is interested in purchasing.

Therefore now builders will have to during project registration submit report from CERSAI on security interests created in the real estate project along with the encumbrances certificate. In case no security interest has been created and builder shall provide an undertaking confirming the same.

Further the builder Has to also submit a CERSAI report when there are any changes on security interests created on real estate project by the builder.

The CERSAI reports submitted should be generated within 10 days before the date of submission.

So now a homebuyer can just visit MahaRERA website before buying a house and know whether the property is already on loan or not.

Adv Sunil Kewalramani says, “The MahaRERA has taken a great step by issuing this Order as it will further increase transparency in the Real Estate Industry. Now the home-buyers can check security interest created by the Developer in the Real Estate Project, Apartment which homebuyers is interested in purchasing.”

Also Read: Samudra Mahal Duplex Sold For ₹46.29 crore

The post Does a loan already Exist on the Home you wish to Buy? Don’t worry you can know about it appeared first on Square Feat India.

By Varun Singh

Several banks like the State Bank of India (SBI), Kotak Mahindra, Bank of Baroda (BoB) and Punjab National Bank (PNB) are offering loans at record low-interest rates to cash in the spending rush ahead of the festive season.

State Bank of India (SBI) will charge home loan borrowers an interest of 6.7% based on their credit score, irrespective of the loan amount. The offers are available to all segments of borrowers irrespective of the profession of the borrower. The 6.70% home loan offer is also applicable to balance transfer cases.

Kotak Mahindra Bank has reduced its home loan interest rates by 15 basis points (bps) from 6.65% to 6.50% p.a. This special rate of 6.50% p.a. is a limited period festive season offer beginning 10th September and ending 8th November 2021.

Bank of Baroda (BoB) is offering a waiver of @0.25% in the existing applicable rates for home and car loans. In addition to that, the bank is also offering a waiver of processing fees in home loans. Now, home loan rates will start at 6.75% and car loan rates start at 7.00%.

Punjab National Bank (PNB) too has slashed the repo-based lending rate by 25 basis points (bps) to 6.55%.

HDFC too, announced a festive offer with home loans starting from 6.70 per cent. This offer will be applicable to all new loan applications irrespective of the loan amount or employment category. The special festive offer at 6.70 per cent is for all loan slabs and for all customers with credit score of 800 and above.

Real estate experts feel that these interest rate cuts could be a major factor in boosting the home sales this festive season.

Vedanshu Kedia, Director, Prescon Group said, “It is an encouraging move by the leading banks to slash interest rates especially during the onset of the festive season. Even now, a low-interest rate by reputable banks is bound to catapult unimaginable economic growth in the country as a result of enhanced consumption. The initiative will surely make homeownership affordable and viable for the fence-sitters who can now plunge on the best opportunity to buy their dream home.”

Cherag Ramakrishnan, Managing Director CR Realty said, “Considering the auspicious festive season ahead, the timing of the reduction in interest rates by leading banks couldn’t have been better. The real estate market has seen decent sales this year and this reduction in interest rates would further help to keep up the sales momentum.”

Bhushan Nemlekar, Director, Sumit Woods Limited said“The reduction in home loan rates by leading banks is going to help the demand side immensely. The real estate sector has benefited immensely from the record low home loan rates. Currently, the all-time low, sub-7% interest rates are encouraging consumers to proceed with their purchase and quickly close their transactions. Low interest rates also help enhance eligibility for home buyers thereby bringing more customers into the marketplace.”

Pritam Chivukula – Co-Founder & Director, Tridhaatu Realty and Hon. Secretary, CREDAI-MCHI said, “The reduction in home loan interest rates by leading banks for a limited period have extended the best buying opportunity for the homebuyers. The banks are competing to grab the home loan customers before the fiscal year ends. Currently, the home loan rates are at an historic 15 year low, as banks compete in a market with low credit demand. The benign interest rates environment will continue for some time and it is unlikely that interest rates will fall further from the current levels. For the next few days, the buyers can swoop in on good deals on the back of rock-bottom interest rates on home loans along with festive offers from good developers on the eve of expected price rise. We can already see that the demand for residential properties has picked up now as people are beginning to believe that this is the best time to buy a property.”

Ashok Mohanani – President, NAREDCO Maharashtra said, “There is already a growing desire of owning a home as consumers look at it as a necessity in this unprecedented time of the COVID-19 pandemic. With the onset of the festive season, there is a stiff competition amongst the financial institutions to provide the consumers with the best home loan interest rates. This is the best time to buy a home as it gives the aspiring homebuyers a lifetime opportunity to purchase their dream home with various festive offers as well as all-time low interest rates. These factors are also proving to help spur the real estate demand that was temporarily hit last year as a result of the pandemic.”

Jayesh Rathod, Executive Director, The Guardians Real Estate Advisory said, “The move to reduce interest rates by few banks is encouraging and will create competitive housing finance options for the home buyers and eventually pave path for robust housing demand. We have been maintaining since long that banks need to pass on the benefits of the reduced repo rates to consumers and we are happy to see the same happen now. The low interest rate regime is going to be a game-changer for the whole real estate sector especially at a time when the economy is on a recovery trail. It will also augur well for ready-to-move-in homes and the affordable housing segment. Both of these categories will benefit immensely from the reduced rates. From the consumer perspective, this is going to be the last call to take advantage of the bank offers as a difference of even a half percentage on the interest rate on a housing loan can save lakhs of rupees of the prospective buyers.”

Also Read: Homebuyers Prefer This Period For Home Loans

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By Varun Singh

Are you planning to buy a new house and are unsure whether security interests is created on the property that you intend to buy from the developer then you should please read this.

Buying a house is a decision that people don’t take everyday. It is a decision which is made once in a lifetime by a homebuyer.

It is a tedious task from Planning to registering and finally moving in the house.

And a homebuyer cannot afford to make even a simple mistake, or being ignorant.

MahaRERA, recently came out with a circular that talks about the Central Registry Securitisation Asset Reconstruction and Security Interest of India (CERSAI).

CERSAI is very important when it comes to a property, and a homebuyer should know and be aware that whether the home that he intends to buy has a security interest created on it or not.

Ministry of Finance notified the establishment of the Central Registry Securitisation Asset Reconstruction and Security Interest of India (CERSAI), a Government Company , incorporated for the purpose of operating and maintaining the Central Registry under the provisions of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act).

The objective of setting up of Central Registry is to prevent frauds in loan cases involving multiple lending from different banks on the same immovable property.

Government of India, subsequently issued a Gazette Notification dated January 22, 2016 for filing of the following types of security interest on the CERSAI portal:
a. Particulars of creation, modification or satisfaction of security interest in immovable property by mortgage other than mortgage by deposit of title deeds.

b. Particulars of creation, modification or satisfaction of security interest in hypothecation of plant and machinery, stocks, debts including book debts or receivables, whether existing or future.

c. Particulars of creation, modification or satisfaction of security interest in intangible assets, being know how, patent, copyright, trademark, licence, franchise or any other business or commercial right of similar nature.

d. Particulars of creation, modification or satisfaction of security interest in any ‘under construction’ residential or commercial or a part thereof by an agreement or instrument other than mortgage.

CERSAI had started registration of the data in respect of paragraphs (a) to (c) above, for the security interests created on or after January 22, 2016, w.e.f. May 25, 2016 for Scheduled Commercia[ Banks and w.e.f. July 1,2016 for all other entities registered with them.

Further, the registration of data in respect of paragraph (d) above has commenced since June 8, 2017 for all banks and Fls registered with CERSAI.

Meanwhile, the banks/ FIs have also started registering the security interests created before January 22,2016 (subsisting records).

MahaRERA circular stated, “Homebuyers / Allottees should be aware of such security interests created on real estate Projects / Apartments, which homebuyer is interested in purchasing.”

Therefore, MahaRERA has decided that henceforth all developers shall:
-During Project Registration, Submit Report from CERSAI on security interests created in the Real Estate Project (Avaitable on CERSAI website at www.cersai.org.in ) along with the encumbrances certificate. Incase no security interest has been created then the Promoter shall provide an undertaking confirming the same.

-Further, In each Quarterly Update, Promoter shall submit updated CERSAI Reports on Security Interests created on Real Estate Project by the Promoter or any of the allottees on the apartments in the project.

-The CERSAI reports submitted should be generated within l0 days from the date of submission.

Thus, henceforth before buying any property it is better for a homebuyer to check on the MahaRERA website whether the property has been mortgaged or not and save himself from any future agony.

Also Read: Conveyance Deed has to be registered within 3 months of Receiving OC

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By Varun Singh

Looking to buy a home availing a housing loan then read this minutely. RBI has linked individual housing loans to Loan To Value (LTV) ratio.

On Friday, RBI Governor, Shaktikanta Das made several key announcements while speaking on the Monetary Policy.

RBI, as expected, has kept both the repo rate and reverse repo rates unchanged at 4% and 3.35% respectively.

For individual homebuyers, there’s a big announcement that the governor made.

RBI announced Rationalisation of Risk Weights on Individual Housing Loans.

The Governor said, “Under the extant regulations, differential risk weights are applicable to individual housing loans, based on the size of the loan as well as the loan-to-value ratio (LTV).”

The Governor further added, “In recognition of the role of the real estate sector in generating employment and economic activity, it has been decided to rationalise the risk weights and link them to LTV ratios only for all new housing loans sanctioned up to March 31, 2022.”

“This measure is expected to give a fillip to the real estate sector.”

Shaktikanta Das, Governor 

Experts on the matter claim this announcement will encourage banks to lend more to individual homebuyers without feeling the stress on their balance sheets.

Anuj Puri, Chairman, Anarock Property Consultants said, “On a positive note, RBI’s move to rationalize risk weightage on home loans and linking housing loans risks only to loan-to-value is a welcome move. In the current challenging times, banks have been reluctant to lend owing to risks amidst the pandemic while buyers have remained financially stressed.”

On the linking of housing loans to LTV Dr Niranjan Hiranandani, President (National) NAREDCO and Assocham said, “Particularly this step would benefit borrowers of higher value loans. It would ensure that more credit is available to borrowers.”

“Decision to rejig home loan rules will provide boost to the real estate sector.”

Dr Niranjan Hiranandani, President (National) NAREDCO and Assocham.

Not just luxury, even affordable and mid income housing will also benefit from the announcement.

“RBI’s stand to rationalize risk weightage on home loans is a step in the right direction. Homebuyers in the affordable, mid-income and upper middle-income housing segment will benefit immensely from this move.” Ankush kaul, President (Sales & Marketing) – Ambience Group.

Also Read: MSRDC Plots Worth Rs 15,000 Crore Up For Grabs

The post Seeking A Housing Loan? Read This New RBI Policy appeared first on Square Feat India.

By Varun Singh

On Monday, Yes Bank came out with e-auction sale notices for sale of immovable assets belonging to Essel Infraprojects Limited.

Yes Bank issued the notices under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act 2002.

The symbolic possession of the immovable properties were taken on January 8, 2020 by Yes Bank.

This was pursuant to a demand notice issued to the borrowers who in this case is Essel Infraprojects Ltd, on November 6, 2019.

The e-auction will be carried out on November 10, 2020 between 2 pm to 3 pm for recovery of Rs 556 crore.

According to the notice, Essel Realty Developers Pvt Ltd is the guarantor.

The property that the bank has put on e-auction is owned by Essel Infraprojects Ltd.

Yes Bank has put a total of eight commercial premises located in Kohinoor City Mall for e-auction.

The first auction notice includes four units with a carpet area of 9579 square feet on the fifth floor along with 22 car parks

The reserve price put by the bank for the sale of the property is Rs 10.50 crore.

The second auction notice includes four units with a carpet area of 9579 square feet on the sixth floor along with 22 car parks in the mall.

The reserve price for this property also is Rs 10.50 crore. The Earnest Money Deposit is Rs 1.05 crore for fifth floor units and Rs 1.05 core for sixth floor units.

The total amount due according to the notice is Rs 556,52,30,349.63 as on November 6, 2019 together with interest, cost, charges and expenses thereon with effect from November 7, 2019.

A similar notice for all the eight units was issued by the bank on May 30 too.

The earlier notice issued in May was for eight units with a carpet area of 19,159 square feet along with 44 car parks in Kohinoor City Mall. The reserve price then was Rs 26.80 crore.

Earlier this year, the recovery cell of PMC Bank had put a luxurious Ferreti Yacht 881 and two aircrafts a Dassault Falcon and a Bombardier Challenger on sale.

Also Read: Realty Sales Of Sep 2020 Surpass Sep 2019 By 38%

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By Varun Singh

The announcements made by the RBI Governor Shaktikanta Das has put a smile on the face of real estate sector.

Real Estate sector has been facing a tough time due to COVID 19 and the following lockdown.

However, Thursday saw the real estate sector appreciating the steps taken by the RBI, especially the infusion of liquidity via the National Housing Bank in the housing sector. Also the restructuring of loans is a major boost for the sector.

Dr Niranjan Hiranandani President – Assocham and Naredco called the RBI announcement a positive step.

He said, “Opening up the window for restructuring of loans to companies, individuals and MSME under mandated safeguards grants breather to the liquidity strapped industry.”

“Additionally, liquidity of Rs 10,000crores announced to be infused in NABARD and NHB will definitely aid the reeling sector to tide over the liquidity crisis,” said Hiranandani.

Nayan Shah, President, CREDAI MCHI lauded the RBI governor, Shaktikanta Das, for allowing restructuring of loan. He said, “This is bound to provide a huge relief to many organizations in Real Estate as well as the larger economy.”

Anuj Puri, Chairman – ANAROCK Property Consultants says, “RBI announced several additional measures that will go on to accelerate the economy, enhance liquidity, improve flow of credit and deepen digital payment facilities.”

RBI allocated Rs 5,000 crore each to National Housing Bank and NABARD. Puri says this is a much-needed step for sectors including real estate reeling under the liquidity crisis.  It will help infuse capital into the HFCs and eventually provide relief to developers battling liquidity issues in COVID-19 times.

Developers are more excited about the one-time restructuring of loan allowed by RBI more than other aspects it seems.

Bhushan NemlekarDirector, Sumit Woods Limited, said, “The decision to allow one-time restructuring of loans by RBI is a great news for the real estate industry. This will certainly help a lot of developers to complete their projects on time and a lot of buyers to get their homes soon.”

Manju Yagnik, says, allowing restructuring of loans for stressed MSMEs will help small businesses which are huge employment generators.

Yagnik who is Vice Chairperson, Nahar Group and Vice President NAREDCO (Maharashtra) says, an extension in the Loan moratorium would have helped lower and middle-income groups to better manage their finances.

A sentiment upswing will follow among developers and buyers alike given the infusion of additional liquidity to NABARD and National Housing Bank, says, Ram Raheja, Director at S Raheja Realty.

Shishir Baijal, Chairman & Managing Director, Knight Frank India, calls the RBI announcement as interim breather for the real estate sector.

He said, “The loan resolution plan, which allows for payment moratorium up to 2 years, for corporate and personal borrowers should provide a breather to stressed real estate developers and individual borrowers in the housing segment alike.”

Also Read: RBI shield for housing sector from liquidity disruptions

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By Varun Singh

Home loans are shifting from metro cities to periphery districts. According to a research, smaller town and cities have seen a better home loan off take, beating the metros share by eight per cent.

A look at India’s home loan market reveals that the pace of home loans growth is at 19% for rest of the nation during Mar-13 to Mar-19. While that of districts which comprise of top 7 metro cities grew at 12% over the same period. The research has been carried out by JLL India.

Research reveals that home loan growth in the districts that comprise of top 7 metro cities, Delhi, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad and Pune, grew at a relatively slower pace than rest of the country.

Improved connectivity and economic prospects and lower land cost have spurred higher
residential growth in these smaller cities, which is reflected in rising home loans. The urban
sprawl, as well as growth in peripheral regions, has created new growth regions apt for better
investment.

India’s home loan market growth stood at Rs 11.5 trillion as of Mar-19. Districts comprising top 7 metro cities witnessed a growth from Rs 1.8 trillion to Rs 3.6 trillion during Mar-13 to Mar-19.

On the other hand, the rest of India home loans grew at a high of 19% from Rs 2.8 trillion to Rs 7.9 trillion. This implies that the growth in Tier-II and Tier-III cities is quite substantial. 

The top 4 districts comprising metro cities of Delhi, Mumbai, Kolkata and Chennai grew between 8 and 12%. However, the peripheral districts around these metros grew at a higher pace.

For instance, Gurugram grew by 18% as against 8% of National territory of Delhi due to growth of offices and affordable housing options this region.

Similarly Chennai grew by 8% while neighbouring Kanchipuram grew by 35%. This growth has been driven by higher demand for mid-income and affordable housing segment.

Demand for housing shifted to suburban regions as home buyers looked for homes that were within their budget. Lower land cost, larger land parcels and integrated amenities attracted homebuyers looking for aspirational homes at affordable prices.

The other two prominent districts mainly- Bengaluru and Pune have registered higher growth of 15% and 18% respectively during the same period and these districts have been driven by strong service sector growth thereby pushing housing demand. 

The study of the home loan growth, highlights that there are 45 districts representing Tier-II/ III cities that have registered higher growth than the national average.

Most of these cities have been driven by manufacturing or services sector like ceramic tiles, diamond processing, tourism, textiles, leather industry, agro-processing, automobiles, engineering goods etc.

The economic growth over the years has been complimented with improving connectivity, infrastructure growth, better education and health care facilities leading to improvement in living standards.

The impact of these projects along with government policies is expected to be long term and will make these cities more attractive destinations for various industries as well as residential real estate.

Also Read: RBI finally takes steps to counter coronavirus lockdown

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