The share of residential housing loans in total loans has increased over the past 11 years to 14.2% in March 2023 from 8.6% in March 2012, according to the report.
During this period, the share of commercial real estate (CRE) in total loans fluctuated between 2.0 and 2.9%.
“The banking system’s total exposure to real estate stood at 16.5% of total loans in March 2023. Given the secured nature of these loans and loan-to-value (LTV) regulations , defaults remain below 2%,” he said. said.
Pradeep Aggarwal, Founder and Chairman of Signature Global (India), said that Indians historically have shown a preference to avoid loans, and if they take one, their tendency is to repay it as soon as possible.
“This approach is particularly evident when it comes to home loans, as buyers seek to settle their debts quickly. Home ownership is seen as a source of pride and fulfillment, and individuals are motivated to avoid defaults and the potential loss of their home. As a result, the non-performing asset (NPA) rate in the mortgage segment remains low,” he said. Moreover, the regulations and guidelines set by the Reserve Bank of India (RBI) regarding home loans play a crucial role in keeping this NPA rate low,” Aggarwal added. Andromeda Sales Executive Chairman V Swaminathan said the residential housing segment has seen a growth in demand, thanks to factors such as the establishment of RERA (Real Estate Regulation and Development Law), and the impact of the pandemic. As a result, the share of real estate loans in the overall personal loan portfolio has increased.
“Home loans are secured loans, often involving the borrower’s equity as a down payment. Due to the potential risk of losing their equity in the event of default, borrowers generally favor early repayment of their home loans. As a result , the non-performing asset (NPA) in the mortgage segment remains weak,” he added.
According to RBI data, housing loan outstanding (including priority sector housing) in March 2023 was Rs 19,36,428 crore, up 15% year-on-year. The FSR further stated that the All India House Price Index (HPI) recorded its highest increase in the last seventeen quarters (4.6% YoY) in the fourth quarter of 2022 -23.
On a sequential (qoq) basis, the HPI has risen over the past year and increased another 0.6% between January and March.
He also said that during the fourth quarter of 2022-2023, home sales increased by 21.6% and new launches also maintained healthy growth, reflecting the strength of end-user demand as well as investors.
The increase in unsold inventory led to a slight increase in excess inventory in January-March 2022-23, he said.
He noted that with strong housing demand in the post-pandemic period, the housing price gap (real minus trend) closes after a period of about three years. A positive house price gap is an early warning of credit concentration and housing market vulnerability.
According to the RBI’s “Basic Statistical Performance on Credit by Scheduled Commercial Banks in India – March 2023”, the share of loans bearing an interest rate above 9% increased to 56.1% in March 2023, in parallel with the monetary tightening measures from May. 2022.
The Reserve Bank began raising interest in May 2022 to curb inflation following global supply disruptions, following the Russian-Ukrainian war. Since then, the benchmark short-term lending rate has increased by 250 basis points. However, the RBI did not raise the rate in its last two bi-monthly monetary policy reviews.