'Middle class drowning in lifestyle debt': 55% loans not for homes, warns finance expert

India’s household debt is tilting sharply toward consumption and away from asset-building. According to personal finance expert Pranjal Kamra, average individual debt has surged 23% in just two years, and over half of that borrowing now funds personal spending, not homes.

In a LinkedIn post this week, Kamra highlighted that average debt per individual borrower climbed from ₹3.9 lakh in 2023 to ₹4.8 lakh as of March 2025.

But the bigger shift is in how—and why—Indians are borrowing.

According to Kamra, non-housing retail loans now make up 55% of total household debt, far outpacing home loans, which stand at just 29%. These include credit card dues, personal loans, and auto loans—forms of credit typically linked to consumption rather than asset creation.

The trend is especially stark when comparing pre- and post-pandemic lending growth:

Retail Loan Growth (CAGR)
Pre-pandemic (FY09–19) vs Post-pandemic (FY19–24):

• Credit Cards: 12.1% → 21.0%
• Personal Loans: 15.1% → 18.2%
• Vehicle Loans: 16.5% → 14.8%
• Housing Loans: 19.0% → 15.5%

Credit card usage has exploded in particular. Over the last 13 years, spending on credit cards has surged 13x—from ₹1.2 lakh crore to ₹15.6 lakh crore. The number of cards in circulation also grew over 5x—from 2 crore to 10.8 crore.

Kamra summed up the shift bluntly: “Our parents borrowed to build assets. Today, most people borrow to fuel instant gratification.”

Economists warn that rising unsecured credit, if left unchecked, could elevate default risks and reduce long-term financial resilience. While consumption-led borrowing can support near-term economic growth, it also signals deeper changes in how younger Indians approach money.

The boom in retail lending has sparked concern at the central bank as well. In recent months, the Reserve Bank of India has repeatedly flagged rising personal loan and credit card balances as a potential risk to household balance sheets.

Whether these trends signal a structural consumer shift or a financial red flag is now a question facing lenders, policymakers—and borrowers themselves.