EXPLAINED: Key Factors Driving India Mortgage Market

Given the global economic crisis precipitated by the pandemic, it is no surprise that markets around the world are facing many economic challenges across various industries. And the real estate market is no exception. However, in the midst of this bleak scenario, it is reassuring to note that experts are forecasting CAGR growth of around 22% for the Indian home loan market in the near future. Nimish Gupta, Managing Director, RICS South Asia, in an exclusive interview with Zee Business Online, spoke about the key factors driving the mortgage market in India. Here are edited excerpts: –

Nimish Gupta, Managing Director of RICS South Asia, said: “The optimistic analysis is crucial for us to pay attention in many ways: increasing rural-to-urban migration, rising interest rates from rural areas to urban areas. affordable home loans, the government push on housing and the housing shortage in the country.

Nimish Gupta adds, “In my opinion, these are the main drivers of the mortgage market in India. Taking care of these well-identified socio-economic factors will not only ensure an increase in the standard of living, but will also contribute to the economy: –

Employees / business classes have realized that residential rent payments are equivalent to IMEs that will be required to pay for their own homes. This has led to more home purchases through home loans instead of rentals. With a ready-to-move-in inventory available in every asset class, there is also an incentive for people to buy homes because they can find a property that fits their budget and needs. Although the general economic environment is fraught with ambiguity, the fear factor associated with layoffs or pay cuts also pushes people to invest in their own housing rather than rental property, in an effort to seek sustainability. . The growing aspirations of young people with good wages and digitization have led to lower interest rates.

Mortgage Interest Rates: India continues to have one of the lowest mortgage rates among developing economies in the world, despite the prevailing economic conditions. The reduction in the FD / savings rate has caused the Indian market to invest more in real estate where there is additional margin of return due to price checking in the real estate sector. In addition, the suspension of interest on working capital loans to be repaid by March 2020, resulting in relief for the developer, not only encouraged investment and boosted demand in the sector, but also benefited the industry. buyer of cheaper IME home loans.

The lucrative builder / developer programs, which include EMI late payments and construction related plans, are also pushing people to opt for home loans. Despite the low feelings resulting from the COVID -19 situation, reduced stamp duties and easy payments tailored to the consumer have helped revive the segment. Many companies offer concessions to end users with additional incentives such as the ability to refund the reservation amount, statutory fee waivers, refund programs, easy payment structuring, and various freebies.

Monetary Measures Several measures have been taken by the RBI to protect the economy from the impact of the COVID-19 crisis and to offset the effects of the economic downturn. The highest ever reduction in reverse repo and reverse repo rates and the extension of 3-month loan moratoria are steps that have been taken to fuel demand in the market. The apex banking organization also announced the injection of 5,000 crore of INR into the National Housing Bank in an effort to improve the feelings of buyers.

Policy and regulatory support

The government and statutory bodies have supported the sector through various political reforms. The government has already committed to its vision of “Housing for All” under the Pradhan Mantri Awas Yojana (PMAY). The Credit Linked Subsidy Program (CLSS) for the Middle Income Group (MIG), which had been extended until March 2020, has now been extended until March 2021. Introduction of reforms such as the collection of a Uniform GST tax, the Benami Transaction Ban Law, and regulatory and procedural changes imposed by the government are various other measures implemented with the aim of bringing transparency to the sector. The Real Estate Regulation Act (RERA) has also been implemented to protect the interests of buyers on a fair and equitable basis and to enforce provisions relating to project completion and delivery. It brought the necessary transparency in the exchange of transactions between developers and beneficiaries while having a substantial impact on the handling of the number of consumer complaints across the country.

Priscilla C. Carnegie