A home will always have a deep connection with every individual and buying ones own home is fondest dream of almost every Indian. The housing industry in India has been growing at a robust 14-15 per cent and is projected to continue to grow for the next few years.
There is an estimated shortage of around 22 million houses by 2014,and the government and apex bodies like the National Housing Bank (NHB) are playing a vital role in trying to fill this gap. The growth in this sector as well as the changing profile and consumption behaviour of the upwardly mobile population have also brought about a sea change in many aspects of the industry,and most notably the profile of todays home loan buyer.
One of the most evident changes is the decreasing age of the home loan buyer. There has been a trend of reduction in the average age of the home loan buyer from the mid-40s to the mid-30s over the last two decades. There is also a growing segment of under-30 year olds who are buying homes and taking loans for the same.
The rising income levels of this segment coupled with growing aspirations have been major causes of this change in profile. Another major contributor to this phenomenon is the easier access to credit fuelled by banks and housing finance companies (HFCs). Most loan providers view home loans as a high growth product and have been diverting focus to it in the last few years.
Another aspect that has changed is the purpose of a home purchase. While purchasing a house for the purpose of living in it still remains the major reason,there is a growing segment of home buyers who buy a second home for investment purposes.
They also could take a larger home loan for the same as they are aware of the taxation benefits that they can avail of as a result of it. Financially savvy investors are now making use of these multiple benefits of a home loan. As long as there is a significant growth in the housing sector and appreciation of prices,this segment will continue to grow. It is estimated that the Indian mortgage market accounts for 7 per cent of GDP and about two-thirds of the savings of customers availing home loans are deployed in payment of EMIs. Attractive interest rates and ease of credit access here too contribute to the growth of this profile among home loan buyers.
A large chunk of growth in home loans is now coming from tier I and II cities,with the metros approaching a saturation point. The new segment of home loan buyers now come from high growth areas like Pune,Bangalore,Ahmedabad and other non-metro locations. As a product segment,the growth has been seen in affordable housing,with a loan ticket size in the range of Rs 25-40 lakh. Banks and HFCs offer their most attractive rates for this range,and this has fuelled its growth.
Developers have begun shifting their projects to newer non-metro locations or on the outskirts of large metros. This has helped in de-congestion of many cities and banks and HFCs also provide a pre-approval for home loans for most of these projects.
Todays home loan buyer is an empowered individual. Not only is he spoilt for choice,both in terms of properties to buy,but also in terms of home loan providers willing to fund his purchase. He has access to information,is more financially aware and will have multiple banking or financial service relationships.
To cater to this new profile,banks and HFCs will have to value-add and provide high levels of personalised and dedicated service,both at the time of sale as well as through the duration of the loan.
The author is MD,Tata Capital Housing Finance