In India's banking, financial services, and insurance industries, the mortgage industry is one of the most important divisions. Previously, the Indian housing financing business was referred to as the mortgage industry in India. The Indian mortgage industry is now valued at approximately US $ 18 billion. In comparison to other wealthy countries, India's gross domestic product to mortgage ratio is quite low. In other nations, the ratio varies between 25% and 60%, however, in India, it is 2.5 per cent. Over the last few years, the Indian mortgage market has seen rapid growth.
The finance corporations are the most prominent players in this sector, but commercial banks have recently begun to play a significant role in the development and growth of the Indian mortgage industry. Housing Development Finance Corporation (HDFC) is currently the market leader in India's mortgage industry, followed by the State Bank of India (SBI). The Life Insurance Corporation of India (LIC) Housing Finance Limited and the Industrial Credit and Investment Corporation of India (ICICI) Bank are also major players in the Indian mortgage market.
Housing Finance Firms Make Their Mark
Under the supervision of the National Housing Bank, Housing Finance Companies (HFCs) joined the Indian mortgage market in 1988. (NHB). The first HFCs to be established to lend mortgages were LIC Housing Finance Limited (LICHFL) and afterwards GIC Griha Vitta Limited. LIC and the General Insurance Corporation (GIC) respectively promoted LICHFL and GIC Griha Vitta Limited.
Banks vs. Housing Finance Corporations (HFCs)
Up until 1999-2000, HFCs ruled the housing finance industry. However, in the aftermath of the industrial slowdown and increased demand for homes, as well as an increase in people's disposable incomes, commercial banks began boosting their lending to the entire housing sector (including home buyers) in 1999. Commercial banks boosted their loans to the housing industry from 29% in 1999-2000 to 66% in 2004-05.
HFCs' regulation will be taken over by the RBI
In 2019, India's foremost infrastructure development Non-Banking Financial Company (NBFC), 'Infrastructure Leasing & Financial Services Limited (IL&FS), went into default on its debt payments. HDFC, Dewan Housing Finance Ltd (DHFL), PNB Housing Finance Ltd (PNBHFL), and LIC Housing Finance Ltd (LICHFL) all had significant IL&FS exposure. As a result, the housing finance industry experienced a liquidity bottleneck as a result of the crisis. As a result, by changing the National Banking Act, the RBI planned to take over the regulation of HFCs.
In India, the mortgage business is growing at a rapid pace, and the credit market is experiencing a surge. In a few years, the Indian mortgage market is likely to boom. The growth of the mortgage sector in India has been fueled by an increase in infrastructure development and real estate-related activities. In India, the mortgage sector is seen as a critical but not significant role in the economy's and country's growth. The mortgage industry's growth was also aided by fiscal measures implemented as part of the 5-year plans' financial allocations.
The mortgage business needs to grow, and the government's help as a provider and regulator is needed. Foreign direct investments, as well as private capital, should be encouraged. To have access to faster mortgage loans, onerous government procedures must be eliminated. Property and land regulations, as well as rental rules, must be improved. The growth of the Indian mortgage industry will be boosted by credit rating agencies and mortgage insurance companies.
With a population demographics that is the second largest in the world; one can expect that the Indian Mortgage Industry will certainly be as demanding as possible with more and more Indians rising into the middle-class belt. With nearly $20 billion in annual turnovers; the Indian Mortgage Industry will certainly make a big splash sooner than later.