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After subdued growth in the pandemic years, 2022 saw a reversal in housing credit aided by pent-up demand, lower rates in the first half of the year and new project launches.
Market participants expect the demand momentum to sustain going into 2023, aided by the entry of newer players, sustained demand in the mid-to-luxury segment and an increasing desire for home ownership, with the highest demand seen for ready-to-move in houses and projects by established and trusted developers.
Increased demand for housing despite rising interest rates and realty prices reflects the resilience of the market and attractiveness of home loans, said Atul Monga, Founder and CEO of Basic Home Loan, adding that 2023 should be positive given the overall sector momentum and ecosystem support.
Abhishikta Munjal, Chief Risk Officer at IIFL Home Finance, said volumes should expand in the coming year, aided by growth of HFCs and the transition of organisations back to offices, which is likely to boost demand amongst the youth.
However, elevated interest rates, future rate hikes and concerns of a global recession could play spoilsport, with demand seeing some correction from April .
The affordable housing segment is expected to be especially impacted as lower income borrowers battle higher borrowing costs and real estate prices, increase in EMIs and lower discretionary power. But, market participants remain optimistic that despite slower growth, demand will continue to be robust.
“Affordable housing is a market where HFCs have been developing significantly faster, while facing less competition from banks. Affordable HFCs are anticipated to continue expanding faster than conventional peers due to their significantly smaller environmental effect and underlying demand,” said Kalpesh Dave, Head, Corporate Planning and Strategy, at Star Housing Finance.
On the other hand, HFCs are likely to face pressure on margins as they look to keep rates competitive amidst increasing competition from banks. As a result, 2023 could see more home loan companies working with banks to expand their books through co-lending models. Due to this, on-book loan growth is expected to be slower than AUM growth, industry participants said.
“The overall sentiment remains buoyant as investment continues to flow into the sector. This may also be a big year for commercial real estate, as India continues to be a lucrative market ,” said Y Viswanatha Gowd, MD and CEO of LIC Housing Finance.
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