The share of residential housing loans has seen a rise of 14.2 percent in the last eleven years from 8.6 percent in March 2012, according to the Reserve Banks’ latest financial stability report (FSR).
The report also mentioned that the Indian housing sector is witnessing healthy growth with sales growing by 21.6 percent in the fourth quarter between January to March of 2022-23. In addition to this new launches have also maintained a healthy growth, which is a positive reflection of the strength in demand by end-users. During the period between 2012 and 2023, the share of commercial real estate (CRE) in total loans is seen between 2.0-2.9 percent.
Total exposure of the banking system to real estate stood at 16.5 percent of the total loans in March 2023. Keeping in mind the secured nature of these loans and loan-to-value ratio regulations, the loan defaults remain less than 2 percent.
Pradeep Agrawal, Founder and Chairman of Signature (Global) India while speaking to Moneycontrol added, Indians have shown a preference of avoiding loans, and if they do take one, their inclination is to repay it as soon as possible. This type of approach is particularly seen in Home loans as home ownership is a sense of pride and accomplishment for people and individuals are determined to clearoff the defaults fearing potential loss of the property.
Non Performing Asset (NPA) rate in house loans is comparatively low and regulations and guidelines set by RBI pertaining to house roles play essential role in keeping this rate low.
As per the RBI data, housing (including priority sector housing) loans outstanding in March 2023 stood at Rs 19,36,428 crore, which was a up by 15 percent as per year-on-year basis. FSR also added that all India House price Index saw a all time rise in last seventeen quarters at 4.6 percent. In the fourth quarter of 2022-23, house sales grew by 21.6 percent.
The report noted that strong demand for houses post pandemic period is closing after a period of three years. A positive housing price gap is an early warning of concentration of credit and vulnerability in housing market. As per the basic structural return on Credit by Scheduled Commercial Banks in India published by RBI, the share of loans bearing over 9 percent interest rate rose to 56.1 percent in March 2023.
RBI started to rise interest in May 2022 in the wake of disruption in global supply chains from Russia-Ukraine War, since then the benchmark short term lending rate has increased to 250 points.
