6 Trends in India's Home Loan Market

During the pandemic, many millennials learned the importance of homeownership, and many more regarded it as a solid investment opportunity with price stability and significant builder discounts. The goal is to buy a house, either to live in or to use as an asset that can create additional income, primarily for use during times of crisis.

This choice can assist people in living a financially secure existence now and in the future. Between 2021 and 2026, the house loan industry in India is expected to increase at a CAGR of roughly 22%.

COVID-19 caused global upheavals, but it also allowed individuals to consider homeownership as a serious investment. People have realized the security of having a home in the middle of the current market situation's uncertainties. The house loan market is being reshaped by several variables, including lower interest rates and the RBI's embargo.

Millennials are a growing demographic that is more willing to take out loans, and banks are responding by establishing online platforms to expedite loan disbursement.

Given the importance of real estate in the Indian economy's recovery, the industry and government have been working on new advancements in the home loan sector since the pandemic began.

Let's take a look at them and how they might affect the future:

The RBI's recent repo rate drop has lowered home loan interest rates to a new low of 7%. It's fantastic news for ambitious house buyers who have the appropriate down payment money to purchase their first home and benefit from lower EMIs that allow them to save.

Only those with credit scores of 750-800 are eligible for low-interest home loans. As a result, applicants should review their scores before proceeding.

Many banks have stepped forward to lower house loan interest rates to make a home purchase more appealing. Customers are eligible for interest rate reductions. Many banks and financial institutions have announced festive incentives, and this is an extension of those.

In times of COVID, banks want to build up their house loan book.

Secured and unsecured loans are the two most common types of loans. During times of Covid, banks prefer secured loans. Home loans (secured loans) have had the lowest delinquencies historically. As a result, during times of crisis, such as the current one, when uncertainty looms, banks are focusing on building a house loan book rather than unsecured lending books, such as personal loans and credit cards. From the perspective of banks, home loans are a safer proposition.

This, combined with the fact that buyer interest has been at an all-time high over the previous few years, creates an ideal atmosphere for home purchases. Customers believe they may get a better bargain because prices are cheap, home loans are easy to come by, and banks are eager to lend, allowing buyers to save through low-interest bank accounts.

Stamp duty reductions are assisting us in closing a large number of transactions.

For all new home loans sanctioned through March 31, 2022, the RBI has simplified risk weights and linked them to loan-to-value (LTV) ratios. Both borrowers and lenders would benefit from this. The loan-to-value (LTV) ratio is the amount of money a lender can borrow for a purchase based on the value of the property.

The decision to link the risk weight of house loans to the LTV for all new housing loans is a positive step that will benefit the real estate industry. It is intended to provide the industry with a boost by increasing loan flow. The new policy is likely to help big-ticket borrowers, such as those with loans exceeding Rs 75 lakh, who currently account for 12-15 per cent of the entire home loan portfolio and have a higher risk weight.

A loan moratorium was enacted to provide debtors who had been negatively affected by the epidemic with a brief reprieve from loan obligations. Borrowers, on the other hand, have two alternatives when it comes to loan restructuring: either defer interest and principal repayment or repay debts on more favourable terms.

While the moratorium provided a reprieve from repayments, restructuring is another approach to relieve borrowers of the strain of large EMIs while also aiding the industry's recovery from its liquidity crisis. Interest in the moratorium period is also being restructured, which is currently being discussed.

As millennials' demand for house loans grew, banks jumped on the bandwagon, developing online channels to expedite loan disbursement. With more disposable income, millennials value services that are quick and efficient. As a result of this increased popularity, several banks and financial institutions have launched digital initiatives to assist consumers in obtaining loans more quickly and moving forward with their house purchase plans.

In the face of a plethora of lucrative real estate opportunities, there is no better time than now to buy your ideal house or make a secure investment in a property. All of these house loan trends are helping India's real estate sector rebound faster and stronger.

Hopefully, the market will flourish in the next months, with more people approaching banks and financial institutions for home loans at historically low-interest rates, assisting the economy in its recovery from the current crisis.