India’s Home Loan GDP Ratio Stagnates at Just 5%!!!

September 18, 2007	(2 votes, average: 4 out of 5)  Loading ...
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Despite Indian real estate undergoing a paradigm shift, India’s home loan GDP ratio stuck at just 5% as against 50% in the US and UK.

90% of home loan borrowers in India are first time buyers. Interest rates on home loan have sharply risen from 7% in 2003 to 12% in 2007, with its impact largely following across the board including genuine home buyers, industry watchers, builders, and bankers.

A borrower of Rs 10 lakh with loan tenure of 20 years would have to shell out an extra of Rs 3250 every month on his EMI and annual additional burden would be as high as Rs 39,000 and loans up to Rs 20 lakh form 80% of the total housing loan portfolio.

Increasing home loan rates have strengthened the interest pay out on loans. Today, a borrower taking a home loan of Rs 10 lakh with tenure of 20 years will require spending Rs 3250 more every month on equated monthly installments and the yearly additional burden may go up to Rs 39,000 and loans up to Rs 20 lakh form 80% of the total home loans.

According to the data showcased by Assocham, the home loan GDP ratio should go double in the budget proposals for 2008-09. Outlined below are the observations made by the authority regarding home loan scenario in India.

Of total, 90% home loan borrowers in India are first time borrowers.

Buying a home is certainly the biggest investment decision any individual makes. This underlines a need for a strong GDP ratio.

High interest rates on home loans along with increasing property prices have largely affected buyers’ affordability. Still, the demand for home loans continue to persist and will become stronger in near future.

There is a major shortage of around 19.4 million housing units in India. Of this, 6.7 million is earmarked for urban India whereas the remaining 12.7 million units in rural India.

Demand for residential property is likely to shoot up and there will be a requirement of additional 45 million units for both rural and urban areas by 2012.

Indian middle class has grown by more than 10 times in the past years from its current size of 50 million to 583 million people over the next few months.

News Published Under:   Home Loans |

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