India’s Real Estate Sector Is Expected To Reach $1 Tn By 2030: Shalinee Mimani
In our interview with Shalinee Mimani, Chief Risk Officer (CRO) at Godrej Capital, we explore how big economic factors like inflation and job rates affect people wanting to buy homes. Shalinee shares how things changed last year with more people keen to buy homes even though prices went up. She also talks about how new technology like Artificial Intelligence (AI) and blockchain made it easier to get home loans. The CRO also explains how lenders are being careful with risks and managing uncertainties in the changing economy. Excerpts:
How did macroeconomic factors such as inflation, interest rates or employment rates influence the borrowing patterns and decision-making among potential homebuyers this year?
The housing loan market witnessed subdued growth during the pandemic years. However, in the year 2023, we saw a spike in the demand for homeownership and thereby home loans. Despite experiencing a rise in inflation, increased interest rates and higher real estate prices, the housing sector displayed its resilience and appeal by witnessing a surge in the demand for homeownership. We expect the demand momentum to sustain going forward, aided by stabilised interest rates, sustained demand in the mid-to-luxury segment and increasing desire for home ownership amongst the younger generation. The reduced unemployment rate is also expected to continue to reflect well on the quick decision-making of potential homebuyers, shaping their affordability and willingness to take on debt for homeownership.
We are confident the flexibility repayment model with Godrej Capital’s Home Loans, including Design your Equated Monthly Installment (EMI), parallel funding and a full moratorium of up to 12 months will prove beneficial for homebuyers and keep their dreams of homeownership alive.
Were there any observable correlations between economic indicators and the demand for home loans or housing market activity?
The market dynamics have differed after the pandemic hit India in 2020. This past year we have seen a shift in attitude towards homeownership despite rising property prices and interest rates, maybe only as a response to pandemic-induced uncertainties but most definitely because of the improvement in economic indicators.
The housing demand is on the rise and so is the demand for home loans. We believe it is the result of a discernible shift in investment preferences for young buyers, rising income levels and increased but stabilised interest rates. Government initiatives targeting lower and middle-income groups and the entry of new players in both housing development and housing finance further support the market activity this past year.
India’s real estate sector is expected to reach USD 1 trillion by 2030, contributing about 18-20 per cent to the country's Gross Domestic Product (GDP). With this outlook, we maintain optimism that demand for housing loans will also continue to exhibit strength in the years ahead provided the economy remains robust.
How has the integration of technology, such as AI-driven assessments or blockchain for documentation, influenced the efficiency or accessibility of home loans in 2023?
A decade ago, the lending industry couldn't anticipate the transformative impact of AI-driven assessments and blockchain. The traditional loan process involved pre-qualification, application, underwriting, sanction approval and disbursal, with manual credit risk assessment taking weeks or months. With AI, algorithms swiftly analyse a borrower's financial history, credit score and relevant data, enabling precise, data-backed underwriting decisions. Blockchain enhances security and transparency, reducing transaction risk and facilitating ownership transfer and property division through asset tokenisation.
Godrej Capital's robust tech and analytics infrastructure, developed with reputed partners, offers an analytical database, experience management, Customer Relationship Management (CRM), cloud-based core lending system, rule engines and more. Partnerships with leading tech companies for underwriting and data analytics, along with integration with external systems like credit bureaus and government databases, enable real-time verification, credit checks and document validation, enhancing loan evaluation efficiency and accessibility.
How are lenders adapting to manage risks associated with loan defaults or market uncertainties in 2024, especially considering the evolving economic landscape?
Even as India continues to show resilience against global uncertainties, factors like inflation, interest rates and employment rates will continue to influence customers’ borrowing and repayment patterns. To that effect, credit risk becomes a crucial factor in exercising prudence when extending loans to borrowers.
Effective credit risk management is essential for capital preservation, reducing the likelihood of loan defaults. Lenders typically employ a robust credit risk management approach, including the establishment of clear credit policies and procedures, comprehensive credit assessments, monitoring customer payment behaviours and implementing early warning and risk mitigation measures based on changing circumstances.
At Godrej Capital, we utilise advanced data analytics for effective risk management and take both proactive and reactive measures to avoid a default situation. We use automation to regularly communicate with the borrower and keep them informed about their upcoming EMIs and the need to maintain their credit bureau scores healthy.
