Mortgage crisis brews in Bengaluru, Hyderabad: Saurabh Mukherjea warns middle class at breaking point

A surge in mortgage stress among tech workers in Bengaluru and Hyderabad has triggered red flags for Marcellus investment manager Saurabh Mukherjea, who warns of rising loan defaults tied to pandemic-era homebuying and post-COVID job instability.

Speaking on a podcast with Moneycontrol, Mukherjea said first-check bounces on home loans—an early sign of borrower distress—are at 10-year highs, particularly in India’s top tech hubs.

“What we’re hearing from DSAs (Direct Sales Agents) is that first-check bounces are hitting decade-high levels in cities like Bangalore and Hyderabad,” Mukherjea said. “During COVID, many double-income tech families bought larger homes to accommodate remote work. Now, with layoffs and job cuts in tech, they’re struggling to meet both personal loan and mortgage repayments.”

Mukherjea pointed to a potential broader contagion, suggesting that while major lenders like SBI, HDFC, and ICICI are managing asset quality well, many others are on a “very sticky wicket.”

The issue isn’t limited to housing loans. Citing RBI’s December 2024 Financial Stability Report, Mukherjea estimated that one in ten middle-class households has taken on a mix of home loans, vehicle loans, credit cards, and personal loans—often at interest rates that outpace income growth.

“My reading is that one in ten middle-class households in India is in a debt trap,” he said. “That’s a dangerous mix I haven’t seen before in the country.”

He noted a disconnect in the banking sector, where branch expansion continues, but headcount is shrinking—possibly a sign of stress being quietly absorbed within financial services.

“This jobs piece, and its interplay with secured lending, will be very interesting to watch,” Mukherjea said.