Home loan demand is expected to reach pre-covid levels this year

With interest rates at historic lows, demand for home loans is expected to exceed pre-pandemic levels this year. The banking sector expects demand to pick up even if interest rates are raised later this year, as housing demand remains robust.

“There is a huge demand for houses, which started during the pandemic when people realized the need for bigger houses. It is expected to continue and is also a good growth opportunity for more lenders. With interest rates expected to rise, there will be a marginal impact on rates,” one banker said.

HDFC Ltd chairman Deepak Parekh had also recently pointed out that interest rates were still at historically low levels, so a slight increase would not impact demand for home loans.

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

“Home loan interest rates were the lowest in the past year at around 6.5%, but a few banks have started to raise rates slightly. The low rates are offered to the best customers, including those who have high Cibil scores, salaried borrowers, so it’s only a handful of customers who take advantage of the low rates,” said Ratan Chaudhary, head of home loans at Paisabazaar.com.

He said it is expected that from April onwards, bank rates may rise slightly, as typically home loan rates start falling from the holiday season, October to March.

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

Pramod Kathuria – Founder and CEO of Easiloan also noted that banks are no longer adopting an aggressive strategy such as offering processing fee waivers or additional incentives. “Typically, the fourth quarter of the fiscal year is the peak period for home lending. Anything related to rates will come after March,” he said.

However, he expects demand for home loans to remain robust. “The stamp duty surcharge is also likely to return from April 1 and interest rates will start to rise. But all of this will be a knee-jerk reaction in the short term,” he said.

Lenders’ home loan portfolio

Most lenders continue to be keen to grow their home loan portfolio and see it as an area of ​​growth with minimal defaults.

on February 18, Bajaj Housing Finance had extended its festive offer with home loan rates starting at 6.65% per annum for eligible applicants who apply through the official website until 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 accrued interest on the outstanding principal.

Indian residential real estate recorded a 71% increase in sales year-on-year (year-on-year) in 2021 (Jan-Dec) with nearly 2.37 lakh units sold across the seven key markets which include Delhi-NCR, Mumbai, Chennai, Bengaluru, Hyderabad, Pune and Calcutta. Sales at the end of 2021 were at 90% of pre-Covid (2019) levels.

Published on

February 27, 2022

Dorothy H. Lewis