The chief executive officer of Housing Development Finance Corporation (HDFC), Keki Mistry, has expressed his belief that the youth bulge in India will drive housing demand for years to come, as reported by the Financial Times.
As rising incomes have made homes more affordable, India's young population, which constitutes well over half of the country's total population, will inevitably reach an age where homeownership becomes a necessity.
Mistry, a veteran of the industry, emphasised the structural demand for housing and the corresponding demand for housing financing.
India's economy has rebounded from the Covid pandemic, and its population has become the world's largest this year.
As a result, consumers have been borrowing at a faster rate than companies to finance purchases ranging from houses and cars to education.
In March, banks recorded a 20.6 per cent year-on-year increase in personal loans, driven primarily by housing loans.
In contrast, lending to the industry experienced slower growth at 5.7 per cent in March, compared to a 7.5 per cent increase in the previous year.
Mistry expressed confidence in the regulatory framework of India, dismissing concerns about the rapid growth of unsecured lending.
He highlighted the stringent regulations in place and the absence of significant credit issues in the unsecured lending sector.
HDFC's net profits for the fiscal year ending in March rose by 21 per cent to Rs 460 billion (approximately $5.6 billion), bolstered by robust house-buying in India's smaller towns and cities.
Despite this growth, India still maintains one of the lowest rates of housing loans to gross domestic product, although this ratio has nearly doubled every decade since the beginning of the century.
Factors such as rising incomes, relatively stable housing prices, and government incentives have made homeownership a more realistic goal for many middle-class consumers in India. Mistry noted that affordability today is considerably better than in the past.
Additionally, interest rate hikes, which have dampened housing demand in other economies, have had minimal impact in India, where mortgage rates have historically been high.
Mortgage interest rates in India typically range from 9 per cent to 14 per cent, according to non-bank lender Bajaj Finserv.
By comparison, the average variable mortgage rate in the UK stood at 7.4 per cent in April, as reported by government statistics.
Mistry also observed a shift in consumer attitudes towards borrowing, with a greater comfort level evident in taking loans. He noted that the fear of borrowing money, prevalent decades ago, has dissipated in today's society.
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