2019 is the year of housing credit growth, prompting mortgage penetration

Indian real estate has mostly seen high-interest rates even though the capital appreciation seemed reasonably high. Inflation was seen as a contributory factor, as much as the ill-equipped banking, and the financial sector. But the benefit of hindsight, the increase in demand and supply for housing projects led to the growth of housing finance. Housing credit growth touched 16 percent in FY18, taking the mortgage penetration up to 10 percent.

“Growing affordability for the first-time home buyers, supported by government incentives like the PM’s Awas Yojana is expected to result in a rise in primary home purchases, especially in the affordable housing segment, which will help segmental loan growth to 17-19 percent, “the Icra report said.

The housing credit growth (39 percent by March 2018) has 2 driving factors working towards it.

These were the new mortgage players that made an entry in affordable housing segment, and the government- led initiatives such as the Pradhan Mantri Awas Yojana (PMAY).

What does mortgage penetration mean for homebuyers?

Liberal interest rates and growth in affordable housing has led to increased preference in the residential real estate sector, especially budget housing. With loans towards residential segment grew significantly, the current market is seen conducive for prospective home buyers.

Admiring the government’s efforts to leverage homebuyers as financial creditors in insolvency proceedings, the move is expected to improve housing finance companies’ (HFCs) asset quality, said a report. “The retail home loan asset quality of HFCs is likely to be benefited by the recent Cabinet decision to treat homebuyers as financial creditors,” it added.

The residential real estate is ascending towards greater market investment. For homebuyers, bringing the current market situation, and housing credit growth to their advantage, the property market is expected to mature exponentially. Also with prime real estate regulatory bodies such as RERA, focusing on enhancing transparency in real estate related transactions, the market is making every possible attempt to strengthen real estate in the country.

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