Housing Loan Share In Total Advances Grows To 14.2% Over 11 Years: RBI Report
According to the Reserve Bank of India's financial stability report (FSR), the share of residential housing loans in total advances has risen from 8.6 per cent in March 2012 to 14.2 per cent in March 2023. The report also highlights the healthy growth of the housing sector, with a 21.6 per cent increase in sales in the fourth quarter of 2022-23.
New launches have also maintained strong growth, indicating robust demand from end-users. The FSR notes that the banking system's total exposure to real estate stood at 16.5 per cent of total loans in March 2023, with loan defaults remaining below 2 per cent due to the secured nature of these loans and loan-to-value ratio regulations.
Industry experts emphasise that Indians have historically prioritised repaying loans quickly, particularly in the case of home loans, as home ownership is seen as a source of pride and accomplishment. The low non-performing asset (NPA) rate in the home loan segment is attributed to this borrower mindset and the regulations set by the RBI regarding home loans. The implementation of the Real Estate Regulation and Development Act (RERA) and the impact of the pandemic have contributed to the notable growth in demand in the residential housing segment. As a result, the share of home loans in the overall retail loan portfolio has increased.
Data from the RBI shows that housing loan outstanding in March 2023 was Rs 19,36,428 crore, a 15 per cent year-on-year increase. The all-India house price index (HPI) recorded a significant increase of 4.6 per cent year-on-year in the fourth quarter of 2022-23. House sales grew by 21.6 per cent during this period, and new launches maintained healthy growth, reflecting strong demand from both end-users and investors.
However, the rise in unsold inventory led to an increase in inventory overhang in January-March 2022-23. The FSR highlights that the closing of the house price gap, after a period of around three years, is a positive development but also serves as an early warning of credit concentration and vulnerability in the housing market.
The RBI's 'Basic Statistical Return on Credit by Scheduled Commercial Banks in India - March 2023' reveals that the share of loans bearing an interest rate of over 9 per cent rose to 56.1 per cent in March 2023, following the monetary tightening measures implemented since May 2022. The RBI had raised interest rates in response to global supply disruptions caused by the Russia-Ukraine conflict. However, in the last two monetary policy reviews, the central bank did not increase the rates further.
