EXPLAINED: Key factors driving home loan market in India
Nimish Gupta, Managing Director, RICS South Asia, in an exclusive interview to Zee Business Online spoke on the key factors driving the home loan market in India.
Given the global economic crisis precipitated by the pandemic, it is not surprising to note that markets across the world are confronting many economic challenges in various sectors. And, the real estate market is no exception. However, amidst this bleak scenario, it is reassuring to note that experts are predicting growth at CAGR of approximately 22% for the Indian home loan market in the near future. Nimish Gupta, Managing Director, RICS South Asia, in an exclusive interview to Zee Business Online spoke on the key factors driving the home loan market in India. Here are edited excerpts:-
Nimish Gupta, Managing Director, RICS South Asia, says, “The optimistic analysis is crucial for us to pay attention in many ways – the increase in migration from rural areas to urban regions, the affordable home loan interest rates, the government impetus on affordable housing, and the shortage of housing in the country.”
Nimish Gupta adds, “In my view, here are the main key drivers that are driving the home loan market in India, taking care of these well-identified socio-economic factors will not only ensure the increase in the standard of living but also contribute to the economy:-
Salaried/business class has realized residential rental payments are equivalent to the EMIs that will be required to pay for their own homes. This has led to more buying of homes through home loans instead of rentals. With ready to move in inventory available in each asset class, the people are also enticed to buy homes because they can find a property that fits their budget and needs. Although the general economic environment is rife with ambiguity, the fear factor arising out of job redundancies or salary cuts is also driving people to invest in their own homes instead of in rental property, in a bid to seek permanence. Increasing aspirations of youth with good pay packages and digitalization have resulted in lowering interest rates.
Home loan interest rates: India continues to have one of the lowest housing loan rates amongst developing economies globally, despite the existing economic conditions. The reduction in FD/savings rate has pushed the Indian market to invest more in real estate where there is an added scope of returns due to the price check in the real estate industry. Furthermore, the suspension of interest on working capital loans to be repaid by March 2020 resulting in relief for the developer, has not only encouraged investment and boosted demand in the sector, but it has also benefited the buyer from cheaper home loan EMIs.
Lucrative schemes from builders/developers which include late EMI payment and construction linked plans are also pushing people to go for home loans. Despite the low sentiments arising out of the COVID -19 situation, reduction in stamp duty and easy instalments tailored as per the consumer has aided revival in the segment. Many companies are offering concessions to end -users with additional inducements such as the option of refunding booking amount, statutory fees waivers, cash-back schemes, easy payment structuring, and miscellaneous freebies.
Monetary measures Several steps have been undertaken by the RBI to protect the economy from the impact of the COVID - 19 crisis and to offset the effects of the economic slowdown. The highest ever reduction in repo & reverse repo rates and the extension of loan moratoriums by 3 months are steps that have been taken to fuel demand in the market. The apex banking body has also announced INR 5000 crore to be infused in National Housing Bank in a move to improve buyer sentiments
Policy and regulatory support
The Government and statutory bodies have supported the sector through various policy reforms. The Government is already committed to its vision for ‘Housing for all’ under the Pradhan Mantri Awas Yojana (PMAY). The Credit Linked Subsidy Scheme (CLSS) for Middle Income Group (MIG) which had been extended up to March 2020 has now received an extension till March 2021. Introduction of reforms like levying of one uniform GST tax, Benami Transaction Prohibition (Amendment) Act, and the regulatory and procedural changes enforced by the Government are various other measures implemented in an endeavour to bring transparency in the sector. The Real Estate Regulation Act (RERA) was also implemented to protect the interests of buyers on fair and equitable grounds and to enforce provisions towards project completion and delivery. It has brought in the much-needed transparency in the transaction exchange between developers and allottees while making a substantial impact in addressing the number of consumer complaints across the nation.”
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