India's mortgage market should double in next 5 yrs to $600 bn: HDFC's Deepak Parekh
The chairman of one of India's biggest housing finance companies also said that favourable conditions like rising income levels, improved affordability and fiscal support augur well for the demand for homes.
- Jun 7, 2022,
- Updated Jun 7, 2022 1:52 PM IST
India should be able to double its home loans to around $600 billion within the next five years, wrote HDFC chairman Deepak Parekh in his letter to the shareholders. "This would coincide with the period when India attains its much-aspired goal of being a $5 trillion economy," the Housing Development Finance Corporation (HDFC) boss wrote.
However, Parekh also pointed out that despite the doubling of housing loans, India’s mortgage penetration would still remain low at an estimated 13 per cent of GDP.
"Now is the time to ask ourselves what will it take for India’s mortgage to GDP ratio to cross 20 per cent and beyond? When one looks at comparable Asian economies, the average mortgage to GDP ratios range between 20 to 30 per cent. This implies that housing loans in India will have an exponential growth trajectory for decades to come," he wrote.
The chairman of one of India's biggest housing finance companies also said that the numbers imply that home loan market in India is estimated at slightly over $300 billion, which represents a mortgage to GDP ratio of just 11 per cent. Pointing out the situation, he added that favourable conditions like rising income levels, improved affordability and fiscal support augur well for the demand for homes. "Real estate in India is on an upcycle. Developers are now financially stronger and more disciplined," Parekh said.
Analysing that aspiration to own a home in India will only grow further, Parekh also mentioned, "Over the past two years, I have been on record several times stating that I have never been as optimistic about the demand for home loans as I am currently."
Parekh also wrote, "Despite the recent headwinds in the global macro landscape, I continue to maintain this stance. India is on the cusp of an economic transformation. As the pivot of global growth shifts, India is envisaged to remain amongst the fastest growing major economies. Much of India’s growth will continue to be powered from domestic consumption."
Elaborating on the demand for home loans domestically and globally, Parekh also stated that the pool of resources for lending will be significantly larger and at lower costs. From a regulatory perspective, it is prudent for all large providers of housing finance to operate on a level playing field, with the same rules. Globally too, the scale of mortgage assets is exponentially larger in banks compared to non-banking financial entities.
"We have at length, already articulated the rationale for the proposed merger, which takes cognisance of the future growth potential of the country, the evolving macro environment and changes in the regulatory architecture."
Deepak Parekh is one of the leading personalities who pioneered the mortgage business in India. In April this year, HDFC announced its merger with HDFC Bank in which HDFC will acquire 41 per cent stake in HDFC Bank through the transformational merger, according to an exchange filing by the non-bank lender.
Speaking on the merger, Parekh said that after 45 glorious years of providing homes to millions of customers, the time is right for HDFC to find a new home.
"With the blessings of our regulators, shareholders, creditors and other stakeholders, we look forward to being able to add the third and final significant date in the history of HDFC, which would mark the conclusion of the proposed merger," he concluded.
India should be able to double its home loans to around $600 billion within the next five years, wrote HDFC chairman Deepak Parekh in his letter to the shareholders. "This would coincide with the period when India attains its much-aspired goal of being a $5 trillion economy," the Housing Development Finance Corporation (HDFC) boss wrote.
However, Parekh also pointed out that despite the doubling of housing loans, India’s mortgage penetration would still remain low at an estimated 13 per cent of GDP.
"Now is the time to ask ourselves what will it take for India’s mortgage to GDP ratio to cross 20 per cent and beyond? When one looks at comparable Asian economies, the average mortgage to GDP ratios range between 20 to 30 per cent. This implies that housing loans in India will have an exponential growth trajectory for decades to come," he wrote.
The chairman of one of India's biggest housing finance companies also said that the numbers imply that home loan market in India is estimated at slightly over $300 billion, which represents a mortgage to GDP ratio of just 11 per cent. Pointing out the situation, he added that favourable conditions like rising income levels, improved affordability and fiscal support augur well for the demand for homes. "Real estate in India is on an upcycle. Developers are now financially stronger and more disciplined," Parekh said.
Analysing that aspiration to own a home in India will only grow further, Parekh also mentioned, "Over the past two years, I have been on record several times stating that I have never been as optimistic about the demand for home loans as I am currently."
Parekh also wrote, "Despite the recent headwinds in the global macro landscape, I continue to maintain this stance. India is on the cusp of an economic transformation. As the pivot of global growth shifts, India is envisaged to remain amongst the fastest growing major economies. Much of India’s growth will continue to be powered from domestic consumption."
Elaborating on the demand for home loans domestically and globally, Parekh also stated that the pool of resources for lending will be significantly larger and at lower costs. From a regulatory perspective, it is prudent for all large providers of housing finance to operate on a level playing field, with the same rules. Globally too, the scale of mortgage assets is exponentially larger in banks compared to non-banking financial entities.
"We have at length, already articulated the rationale for the proposed merger, which takes cognisance of the future growth potential of the country, the evolving macro environment and changes in the regulatory architecture."
Deepak Parekh is one of the leading personalities who pioneered the mortgage business in India. In April this year, HDFC announced its merger with HDFC Bank in which HDFC will acquire 41 per cent stake in HDFC Bank through the transformational merger, according to an exchange filing by the non-bank lender.
Speaking on the merger, Parekh said that after 45 glorious years of providing homes to millions of customers, the time is right for HDFC to find a new home.
"With the blessings of our regulators, shareholders, creditors and other stakeholders, we look forward to being able to add the third and final significant date in the history of HDFC, which would mark the conclusion of the proposed merger," he concluded.