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MUMBAI: The share of residential housing loans in total advances has increased over the past eleven years to 14.2 per cent in March 2023 from 8.6 per cent in March 2012, according to the latest Reserve Bank data. financial stability report (FSR).
It also said that the housing sector is witnessing a healthy growth with sales increasing by 21.6 per cent in the fourth quarter (January-March) of 2022-23. Apart from growing sales, new launches also maintained a healthy growth, reflecting the strength in end-user demand.
The report states that the share of residential housing loans in total loans has increased from 8.6 per cent in March 2012 to 14.2 per cent in March 2023 in the last eleven years.
During this period, the share of commercial real estate (CRE) in total credit has ranged between 2.0-2.9 per cent.
“The total exposure of the banking system to real estate stood at 16.5 per cent of total loans in March 2023. Given the secured nature of these loans and the loan to value (LTV) ratio norms, loan defaults are less than 2 per cent.” Said.
Pradeep Agarwal, Founder and Chairman, Signature Global (India), said that historically, Indians have preferred to avoid debt, and if they do take a loan, they tend to repay it as quickly as possible.
“This approach is especially clear when it comes to home loanS, because buyers want to repay their loan immediately. Home ownership is viewed as a source of pride and achievement, and motivates individuals to avoid loan defaults and the potential loss of their homes. As a result, non-performing assets (NPAs)NPA) Rates in the home loan segment continue to be low,” he said.
In addition, the rules and guidelines prescribed by reserve Bank of India ,reserve Bank of India) Home loan related loans play an important role in maintaining this low NPA rate,” said Agarwal.
V Swaminathan, executive chairman, Andromeda Sales, said there has been a significant increase in demand in the residential housing segment due to factors such as the implementation of RERA (Real Estate Regulation and Development Act) and the impact of the pandemic. As a result, the share of home loans in the total retail loan portfolio has gone up.
“Home loans are secured loans, which often include the borrower’s equity in the form of a down payment. Due to the potential risk of losing their equity in case of default, borrowers generally prefer early repayment of their home loans. As a result The non-performing asset (NPA) rate in the home loan segment remains low,” he said.
Housing (including priority sector housing) loan outstanding stood at Rs 19,36,428 crore in March 2023, up 15 per cent year-on-year, according to RBI data. The FSR further said that the All-India House Price Index (HPI) registered the highest growth in the last seventeen quarters (4.6 per cent annually) in the fourth quarter of 2022-23.
On a sequential (QoQ) basis, the HPI has been rising over the past one year and has increased by 0.6 per cent during January-March.
It also added that during the fourth quarter of 2022-23, home sales grew by 21.6 per cent and new launches also maintained a healthy growth, reflecting strength in demand from end-users as well as investors .
It added that the increase in unsold inventory resulted in an increase in inventory overhang in January-March of 2022-23.
It added that with strong demand for homes in the post-pandemic period, the house price gap (the actual lower trend) is closing after a period of about three years. A positive home price differential is an early warning of credit concentration and vulnerability in the housing market.
With monetary tightening measures beginning May, the share of loans with an interest rate above 9 per cent increased to 56.1 per cent in March 2023, according to RBI’s ‘Basic Statistical Return on Lending by Scheduled Commercial Banks in India – March 2023’ . 2022.
The Reserve Bank began raising interest in May 2022 to rein in inflation in the wake of global supply disruptions following the Russia-Ukraine 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.
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