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HDFC chairman Deepak Parekh has said India should be able to double its home loans to around $600 billion (around Rs 46.63 lakh crore) within the next five years.
“This would coincide with the period when India attains its much-aspired goal of being a $ 5 trillion economy,” he added.
The home loan market in India is estimated at slightly over $300 billion, which represents a mortgage to GDP ratio of just 11 per cent. “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,” he said in his letter to HDFC shareholders.
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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?” he asked.
“When one looks at comparable Asian economies, the average mortgage to GDP ratios range between 20-30 per cent. This implies that housing loans in India will have an exponential growth trajectory for decades to come,” Parekh said. “The aspiration to own a home in India will only grow further.”
Housing finance products are largely standardised. “The key differentiator between home loan providers is the emotional quotient — empathy and understanding the needs and feelings of customers,” he said.
“We remain committed to offering inclusive and customised housing finance solutions across all income segments, increasing women homeownership, encouraging green housing and extending our reach in deep geographies,” Parekh said.
“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,” he said.
“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,” he said.
Much of India’s growth will continue to be powered from domestic consumption, he said.
“At HDFC, we know that this is the right time for strategic choices as we prioritise pathways for future growth. Our moment of truth is that the optimum path to scale up housing finance is to be housed within a banking structure,” he said.
“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,” he said.
“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,” he said.
On the merger of HDFC with HDFC Bank, Parekh said, “at this juncture, we are awaiting regulatory guidance on the path forward. We remain respectful of all our regulators and are confident that the outcome will be judicious and fair at a systemic level.”
“My only ask of our stakeholders is for your patience as we navigate through the complexities of this transaction. More than ever before, we need your trust and support,” he said.
“Trust is the foundation for a successful merger. Fortunately, between HDFC and HDFC Bank, there is a natural affinity. Financial and human capital is critical through a merger process, as is a lucid communication strategy on key developments during this period,” Parekh said.
“It remains our every endeavour to be available and accessible to all our stakeholders to assuage concerns in an open and transparent manner. Further, both entities stand strongly committed to enhanced environmental, social and governance (ESG) disclosures,” he said.
