The housing loan portfolio is an important component of the Indian banking system and is highly sensitive to changes in macroeconomic conditions. The recent report by brokerage firm Kotak Institutional Equities on the housing loan portfolio from the RBI provides useful insights into the overall growth of the sector.
The report clearly indicates that loan growth in the housing loan portfolio has been robust, with all key markets contributing well. However, interest rates have moved up significantly and the transmission has been the highest among the reported lending segments.
Despite this, yields are similar to FY2019 levels and there is no sign of concern on the asset quality front. The housing loan portfolio appears to be in good shape, with no sign of any serious trouble from an asset-quality perspective.
Granular growth with all key markets contributing well to the overall growth
The growth in the housing loan portfolio is driven by two factors viz. the growth in the number of accounts and the average ticket size. As per the RBI report, the loan growth of 15% is driven by a 10% growth in the number of accounts and ~5% in average ticket size.
The metropolitan region (60% of the housing loan market) has led the recovery in loan growth after Covid and is holding up well at ~15% CAGR. Key large markets such as Karnataka have recovered after a long slowdown post-covid.
The growth in housing loans is similar for public and private banks, though the former has seen higher growth in ticket size. The growth is stronger in the ₹10-40 million ticket size as compared to Rs1-2.5 mn.
Housing dynamics look quite comfortable
The report noted that housing dynamics remain quite comfortable, even if there is a slight slowdown. While the feedback from industry participants does not suggest any alarming trends, it is difficult to get a clear picture of the situation on the ground.
This is because the sales data from listed developers only provides a partial picture, and press releases on housing registrations or stamp duty articles in the public domain appear to be much higher than the loan growth that is currently being seen.
The report also found that affordability has not worsened as a result of asset price growth or income levels. This is a positive for housing loan growth, as confidence in income growth or asset appreciation plays a major role when assets are bought on credit.
The report also reveals that housing loan interest rates have increased by 150 bps since March 2022. This is the highest transmission among the reported lending segments. While lenders are not expressing concern, the increase in interest rates could have an impact on loan growth.
Overall, the housing loan portfolio appears to be in a relatively healthy state. Loan growth is broad-based and the interest rate transmission has been swift and significant. With the south catching up to the west in terms of loan growth, it appears that the recovery is set to remain steady.
Disclaimer: The views and recommendations given in this article are those of the broking firm. These do not represent the views of MintGenie.