Bank credit in the form of housing loans saw a good growth of 37 per cent on year at ₹5.4 lakh crore in the first half of FY24, an indicator of the brisk demand for residences.
In FY23, incremental bank credit to the housing sector was 2.5 lakh crore, a growth of 15 per cent per year, according to SBI Funds Management. The data includes priority sector lending as well.
One of the reasons for the jump in the bank credit is the merger effect of HDFC Ltd with the bank, as pointed out by Subha Sri Narayanan, Director, CRISIL RATINGS. Excluding this, the increase was Rs 1.2 lakh crore, broadly in line with the annual growth seen in FY23 of Rs 2.5 lakh crore, she said.
The momentum seems to be sustained in the third quarter as well, with data showing that in October, housing loans saw a 4 per cent rise per month and 14 per cent per year, Nuvama Institutional Equities said. Housing loans contributed about a third to the overall growth in credit in October.
Housing loans currently contribute about 15 per cent to total banking system credit, Jefferies data showed.
The first half of FY24 had looked better for housing loans, led by the pause in the interest rate cycle, strong launch pipeline on the residential projects side and incentives and schemes offered by developers in the festive season, according to Shweta Daptardar, Vice President, Diversified Financials, Elara Capital.
She said that the HDFC-HDFC Bank merger has created more room for housing finance companies NBFCs to lend in the growing mid-income or Rs 25 lakhs to Rs 1 crore ticket size market.
Mortgage penetration in India is low, while housing remains a core basic need. “Structural demand for housing remains intact with increasing urbanisation and rising per capita income. Hence, we expect to continue to see steady housing credit growth over the longer term,” Narayanan said.
The housing sector has seen an unprecedented boom since the onset of the pandemic and the broad momentum seems unabated despite price hikes and the rise in mortgage rates from May 2022.
For the first time since 2013, absorption or sales of houses are running ahead of launches or new supply, testifying to the dizzy demand for houses. In the first nine months of 2023, launches were at 4.3 lakh units, while sales were 5.3 lakh units, according to PropEquity Research.
With the bulk of the sales in the mid-income to premium segment driven by funding, demand for home loans is not seen abating any time soon.
“Asset quality metrics for home loans saw a marginal uptick during the pandemic. But since then they have trended low and are expected to remain stable over the medium term,” said Narayan.
The recent RBI clampdown on retail unsecured personal loans by increasing risk weightage requirements, leaving housing loans outside this purview, would imply a leg up for housing loans going ahead for lenders, said Daptardar.