There was a time before 90’s when housing loan was too expensive in the country and was not a popular instrument. Facts speak for themselves. The housing mortgage market which stood at over $6 billion in 2001 is today estimated at a mammoth $18 billion.

The mortgage market is mushrooming by a hefty average growth rate of 30-40% on an annual basis. A recent World Bank report clearly indicates that India is a major evolving mortgage market in Asia. This sums up the frantic churnings in the Indian housing loan scenario which have provided that much needed shot in the arm to the domestic real estate sector.

Loans on property, in fact, have become one of the most competitive segments of the Indian financial market today with more than a dozen mighty lending institutions vying against each other. Presently, the leading lending institutions in the property segment are: HDFC, SBI, ICICI, Life Insurance Corporation (LIC) Housing Finance, PNB, Bank of Baroda, Canara Bank, etc. Major foreign banks like Citibank, Standard Chartered, HSBC and ABN AMRO have also become very aggressive in the property loan disbursement and have a combined share of over 10% in the segment.  

There are a host of reasons to explain why home loan scenario has undergone a metamorphosis in India in recent years. Primary among them are:

(a.)       Falling of interest rates from double digit figures to single (in 7-9% range),

(b.)       Availability of loan repayment options like fixed rate and floating rate,

(c.)       Rise in the income levels which is fuelling the aspiration in consumers to own a home as early as possible,

(d.)       Various add-ons being provided to loan accesses now.

The easy finance story is only getting more interesting with each passing year as the lending institutions are breathing down at each other’s neck in outdoing each other. The result is: they are conceptualizing and brining in place more attractive housing loan packages for the potential customers. There are several institutions which are providing add on benefits like insurance coverage (free of cost) with loans and easy credit is now also available for house renovation, house extension, etc.

Furthermore, hybrid loan option is well on its way to make a foray in India. But despite all this, the ratio of property loan to Indian GDP is slightly more than 3% which is too low compared to developed countries where it is in the 30-40% range ( in the US, it is nearly 50%). And this triggers the hope, that the scope of further deepening of this financial segment is too segment and given the trends of past five years, there is no reason to doubt as why this would not happen in India.