Home loan demand expected to hit pre-covid levels this year

With interest rates at historic lows, demand for home loans is set to overtake pre-pandemic levels this year. The banking industry expects demand to pick up even if the interest rates are increased later this year as demand for housing continue to be robust.

“There is a strong demand for homes, which started during the pandemic as people realised the need for bigger homes. It is expected to continue and is also a good growth opportunity for more lenders. With interest rates expected to go up, there will be a marginal impact on rates,” said a banker.

HDFC Ltd Chairman Deepak Parekh too had recently pointed out that interest rates are still at historic lows, so a minor increase would not have an impact on the demand for home loans.

Though a number of lenders continue to offer attractive interest rates and other incentives, players said that many have started tightening norms so that only the best of customers get the lowest rates.

“Interest rates for home loans have been the lowest in the last one year at about 6.5 per cent but a few banks have begun to marginally increase rates. The low rates are being offered to the best of customers, which include those with high Cibil scores, salaried borrowers. So it is just a handful of customers who are enjoying the low rates,” said Ratan Chaudhary, Head of home loans at Paisabazaar.com.

He said it is expected that from April onwards, rates across banks might increase marginally as typically, home loan rates start coming down from the festive season— from October to March.

“But despite the increase in rates, we expect the demand for home loans to continue. In fact in calendar year 2022, we expect total number of home loans to cross the pre-Covid level,” he said.

Pramod Kathuria – Founder and CEO, Easiloan also noted that banks are no longer adopting an aggressive strategy such as offering processing fee waiver or additional incentives. “Typically, the fourth quarter of the fiscal is the high activity period for home loans. Anything on the rate front will come post March,” he said.

However, he expects the demand for home loans to remain robust. “The surcharge on stamp duty is also likely to come back from April 1 and the interest rates wills tart inching up. But all this will have a short term knee jerk reaction,” he said.

Lenders home loan portfolio

Most lenderscontinue to be keen on growing their home loan portfolio and perceive it as a growth area with minimal defaults.

on February 18, Bajaj Housing Finance had extended its festive offer with home loan rates starting at 6.65 per cent per annum for eligible applicants who apply through the official website till February 28, 2022.

Similarly, Standard Chartered Bank, India has launched the ‘interest-only home loan’ facility for completed residential properties. where during the initial period, borrowers pay only for the interest accrued on the principal outstanding.

India’s residential real estate saw a 71 per cent rise in sales year-on-year (y-o-y) in 2021 (January-December) with nearly 2.37 lakh units being sold across the seven key markets that include Delhi-NCR, Mumbai, Chennai, Bengaluru, Hyderabad, Pune and Kolkata. The sales at the end of 2021 stood at 90 per cent of pre-Covid levels (2019).

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