The average age of borrowers is expected to decline to 30 in the current financial year from an estimated 33 in FY20, thereby favouring the housing industry, according to CRISIL Market Intelligence and Analytics (MI&A).

The decline in the average age of borrowers will be due to growth in salaries, people’s growing preference for accumulating assets, both for investment purpose and tax benefits, and increased access to formal credit, said CRISIL MI&A, which is a division of rating agency CRISIL.

India’s demographic profile is expected to favour the housing industry, leading to growth in the housing finance market, it added. The estimated average age of borrowers was 35 years in FY15.

As per United Nations DESA (Department of Economic and Social Affairs) estimates, as of July 2023, India had one of the largest young populations in the world, with a median age of 28.2 years, MI&A said.

As of calendar year 2021, 64 per cent of India’s population was between 15 and 59 years, with 26 per cent of the nation’s population under the age of 14. In comparison, in 2020, the United States (US), China and Brazil had 74 per cent, 62 per cent and 78 per cent, respectively, of their population below the age of 60.

CRISIL MI&A expects Mortgage-to-GDP ratio in India to increase to 14-15 per cent by FY25 from FY23. Though the Mortgage-to-GDP ratio is low compared with other developing countries, it has significantly improved from 6.5 per cent in Fiscal 2009.

The factors that are contributing to the improvement in the ratio are rising incomes, improving affordability, growing urbanisation and nuclearization of families, emergence of tier-II and tier-III cities, ease of financing, tax incentives, and widening reach of financiers.

Mortgage penetration in India is far lower than other emerging economies (South Africa, China, Malaysia etc.) owing to lower per capita income and higher proportion of informal employment in the country.

However, CRISIL MI&A believes rising urbanisation, growing disposable income, favourable demographics and government measures will lead to higher mortgage penetration going forward.

It noted that the overall housing finance segment credit outstanding is approximately ₹ 28.7 lakh crore as of FY2023 and is expected to grow at a CAGR (compounded annual growth rate) of 13-15 per cent from Fiscal 2023 to Fiscal 2027.