Buying a new home isn’t easy. Especially if you are considering to acquire a home loan but have no idea how home loan works. Your trusted bank partner and some of the top real estate companies in India also provide home loans in India with guided consultation on every aspect. Here, we’ll be talking about home loan trends in India so that you can make an informed decision regarding your own home loans.

From a report released by State Bank of India, the country’s home loan m犀利士
arket is currently valued at about Rs 24 lakh crore. This is anticipated to double in the next five years that will help enable the country into becoming a $5 Trillion economy.

Several home loan trends suggest that this is due to several reasons but one of the most common reason is fear of hikes. Analysts claim that once the cycle of interest rates begins, people tend to apply for home loans faster as they expect it to increase at a significant rate late. The longer they wait, the more pricey home loans will become. Analysts also expected the housing sector to slow down when the RBI announced hikes in home loan interest rates but in contrast, the housing sector has had a favorable set of months. Some of the top apartment builders in South India have had a fruitful year in delivering homes to families.

Here are some key aspects and trends of home loans in India –  

Aftermath of COVID-19

Due to the cash crunch during COVID-19, many homeowners who had running home loans were not able to meet their monthly payments. The government of India has implemented housing finance moratorium to allow some leeway to homeowners with home loans. However, interest continues to accrue on the amount of the outstanding loan and is not waived.

Authorities have added a loan restructuring option in addition to moratoria as things begin to slowly return to normal. Borrowers can now renegotiate easier terms and conditions, such as longer tenures or paying only the interest component up front, to restructure their loan.

Restructuring and moratoriums will be at the forefront of helping more people acquire home loans. This is also aided with various banks offering their services at a much more affordable rate. It usually takes three to four quarters for home loan rates to affect loans. Banks are now enthusiastic about offering home loans with lower interest rates to improve footfall and cash flow within the system.

The aftermath of the viral Corona Virus has had a significant impact on home loan interest rates. There are two sections of people who have gained and lost during the lockdown. Employees who could stay at home saved a significant amount of money as there was no commute, social activities or other expenses. This cash flow results in more people acquiring physical assets like real estate, gold and other investments. 

Non-Metropolitan cities

Tier-3 and Tier-4 cities saw an increase in home loans during FY22 in comparison to Tier-1 and Tier-2 cities. A lot more families were able to acquire home loans in these cities for their new homes as a new home to stay or for investment. This has come to rise due to the rising development in these cities. Tier-3 and 4 cities has seen a decrease in home loan interest rates  and an increase in demand for new homes.

This again, coincides with the aftermath of COVID-19, rising development and population migration. Along with the rising number of loans, the loan amount has also increased significantly. According to the SBI report, tier-3 areas experienced higher loan growth than tier-1 districts for loans in the Rs 30 lakh to Rs 50 lakh and Rs 50 lakh to Rs 100 lakh ranges.

More home loans results in rising demand which will also create an upward shift in prices. Understanding the pattern, several customers would like to get their new home at the lowest rate possible. This comes along with FOMO (Fear of Missing Out) as several people moved back to their hometowns, the cost of land and homes in these areas are significantly lower compared to metropolitan cities. Home loan interest rates are also significantly lower in Tier-3 and Tier-4 cities.

Rainfall = More loans

States like West Bengal, Uttar Pradesh, Gujarat, Haryana and Madhya Pradesh are agriculture dominated states. Rainfall will always have a high positive influence as this enables them to yield better crops which in turn enables them to raise higher per capita income. The monsoon season is when these home loan trends occur.

As mentioned in the previous trend, housing in smaller towns has seen a major rise in home loans. According to Ravi Subramanian, MD & CEO, Shriram Housing Finance, around 58% of Indians still depend on agriculture for their livelihood. During the last 4 years, the country has seen consistent and steady rainfall during the monsoons. The prosperity and sustainability of India’s agricultural sector is always influenced by the monsoon. This in turn helps farmers gain more from their crop and results in better cashflow. Better cashflow again results in income that people can invest in real estate.

Sustained monsoon forecast indicates that the Western and Southern regions will experience a steady increase in per capita income which will in turn improve demand for housing in the region.

Government Programs

The government’s push to create an affordable housing sector has resulted in a steep rise in housing projects in rural and semi-urban areas. Due to the migration during the pandemic, several people moved from metropolitan cities back to their hometowns which created an influx of people with savings back in rural and semi-urban areas.

Various housing schemes as well as electricity and sanitation coverage has motivated several people to start housing projects in these areas. These developments are not primarily focussed on agriculture and are solely to improve housing sectors. Home loan trends have always been lower in these parts of the country and will motivate more buyers due to higher income and demand.

Government led banks such as SBI and LIC offer home loans with nominal interest rates and processing fees. Reach out to Pavani group to best understand home loan trends and more about financing your new home.

Real Estate Builders in South India such as Pavani Group have some of the best housing projects in South India and are expanding rapidly. Financing consultations are based on home loan trends in India so that you and your family can make a fully informed decision in regards to buying your new home. Various banks have been tied up to make the process seamless and easy for new home buyers.

Leave a comment

Your email address will not be published. Required fields are marked *