6 trends in the Indian mortgage market

Written by Amit Agarwal

Much of the Millennial population realized the value of homeownership during the pandemic, and many others saw it as a good investment opportunity with price stability and great discounts for builders. . The idea is to invest in a house, either to live in it or to turn it into an asset that could generate an additional source of income, mainly to be used in a crisis like this.

This decision can help people lead financially stable lives, now and beyond. The Indian home loan market is expected to grow at a CAGR of around 22% during 2021-2026.

While COVID-19 has sparked disruption around the world, it has enabled people to buy from home as a serious investment. Amid the uncertainties surrounding the current market situation, people have come to understand the security of owning a home. Several factors are reshaping the home loan market, such as cheaper home loans and the RBI moratorium.

Millennials are the emerging demographic that are more open to borrowing, and banks are launching online solutions to disburse loans faster.

Given the central role that real estate plays in the recovery of the Indian economy, industry and government have been working on new developments in the home loan segment since the outbreak of the pandemic.

Let’s take a look at them and the impact they would have in the near future:

Reserve Bank of India repo rate cut

The recent cut in the RBI repo rate took mortgage interest rates to an all-time high of 7%. This is great news for aspiring homebuyers with the cash flow to buy their first home and take advantage of lower IMEs that save money.

However, only those with a credit score above 750-800 are eligible to get home loans at such low interest rates. So, before going ahead, applicants should check their scores and then make their decision.

Home loans at their lowest

In order to make buying a home more lucrative, many banks have decided to reduce interest on mortgage loans. Customers can benefit from a reduction on the interest rates. This is an extension of the festive offers announced by many banks and credit institutions.

Preference of banks for building a portfolio of home loans during COVID times

Among all types of loans – secured and unsecured. Banks have a preference for secured loans in times of Covid. Historically, mortgage defaults on home loans (secured loans) have been the lowest. Therefore, in times of crisis such as the current one, when uncertainty looms, banks are offering the best rates to build a mortgage portfolio, instead of focusing on unsecured loan portfolios that would include loans. personal and credit cards. Home loans are safer from the point of view of banks.

This, coupled with the interest from buyers which is at an all time high over the past two years, makes it a conducive environment for home buying activity. Customers think they can get a better deal because prices are moderate, home loans are at their lowest, banks are the most willing to do so, potentially helping buyers save through low interest on property loans. Bank accounts.

Reducing stamp duty really helps us close a lot of business.

RBI loan at relaxed value

The RBI rationalized risk weights and linked them to loan-to-value ratios (LTVs) for all new home loans sanctioned through March 31, 2022. This would make buying a home attractive to both borrowers and investors. lenders. The loan-to-value ratio (LTV) refers to the proportion of the property’s value that a lender can borrow for a purchase.

The pegging of the mortgage risk weighting to the LTV for all new mortgage loans is a good thing and will benefit the real estate industry. This will give the industry a boost as it should lead to increased credit flows. The new measure is expected to provide relief to large borrowers, say above Rs 75 lakh, whose current share is around 12-15% of the total home loan portfolio, where the risk weight is higher.

Credit moratorium and restructuring

A loan moratorium was introduced as a temporary relief from loan repayments to borrowers who have been negatively affected by the pandemic. However, with loan restructuring, borrowers have two options: either delay repayment of interest and principal, or repay the loans on favorable terms.

While the moratorium was like instant relief from repayments for a few months, restructuring is another way to minimize the burden of IMEs on borrowers’ shoulders and help the industry recover from the liquidity crunch. Discussions regarding the restructuring of interests over the moratorium period are also ongoing.

Banks launch digital customer integration

As banks saw an increasing demand for home loans from millennials, they quickly capitalized on this new opportunity by launching online solutions to disburse loans faster. Millennials with higher disposable incomes appreciate fast services that take less time. In light of this growing traction, various banks and financial institutions have implemented digital initiatives to help customers get loans faster and move forward with their buying decision.


It can be said with certainty that there is no better time than now to buy your dream home or invest in a property from a security standpoint in the presence of a myriad of lucrative offers in the area. real estate. All of these mortgage lending trends are acting as growth engines for India’s real estate industry to help it recover faster and come out stronger.

Hopefully the market will prosper in the coming months, with more and more people approaching banks and financial institutions for home loans at record interest rates, and helping the economy recover from the current crisis.

Amit Agarwal is co-founder and CEO of NoBroker.com

Priscilla C. Carnegie