With rapid urbanisation, an evolving middle class, and increasing financial accessibility, owning a home has become an achievable dream for many. In addition to affordability, consumers seek premium homes, a trend that has emerged in recent years.
One of the most notable trends in housing demand has been the surge in home loans in the bracket of Rs 50 Lakhs - Rs 1 crore. The shift is indicative of broader economic changes, allowing more people to secure homes without the burden of crippling debt. The icing on the top is the RBI repo rate cut, for the first time in nearly five years, which lowers borrowing costs for homebuyers and developers, enhancing affordability.
Performance of Housing Finance Companies
Individual housing loans outstanding as on 30-09-2024 stood at Rs 33.53 lakh crore, showing growth of 14% over the corresponding period of the previous year.
- As on 30-09-2024, EWS & LIG accounted for 39%, MIG accounted for 44%, and HIG accounted for 17% of outstanding individual housing loans.
- Individual housing loan disbursements during the half-year ended 30-09-2024 were Rs 4.10 lakh crore, while disbursements during the year ended 31-03-2024 were Rs 9.07 lakh crore.
- For the quarter ended September 2024, the Housing Price Index (NHB-RESIDEX) recorded a YoY increase of 6.8% as compared to 4.9% during the previous year.
Ankur Jalan, CEO of Golden Growth Fund (a Category II real estate-focused AIF), states, "A notable increase in demand for mid-to-premium housing, driven by a desire for better amenities, is reshaping the real estate market. Homes in the Rs 70 lakh to Rs 1 crore range are especially popular. As the middle class expands, this demand will likely fuel further growth in mid-range home loans, potentially surpassing half of all outstanding mortgages."
Highlighting this shift, Magicbricks' latest report also shows that the Rs 50 lakh - Rs 1 crore segment has emerged as the most popular category in Q4 2024, accounting for 36% of the total home loan disbursals. This was followed closely by the Rs 10 lakh - Rs 50 lakh category, which comprised 33.7% of the total disbursals.
Additionally, the report suggests that home loans with a ticket size of Rs 50 lakh - Rs 1 crore saw disbursals surge by 80%. This trend is prevalent in cities like Mumbai, Delhi, Bengaluru, and Pune, where the middle-class segment is rapidly expanding. Affordable housing options have significantly changed the traditional view of an accessible home loan. Several key factors have contributed to this surge in home loans under Rs 1 crore.
As per the National Housing Bank (NHB), the mid-income group (MIG) is becoming the backbone of the housing sector, making up 44% of outstanding individual housing loans.
Paradigm Shifts in Home Loan Segment
India's middle class is rapidly expanding, with people earning higher salaries and financial stability, particularly in urban areas. With income growth, the aspirations are shifting toward homeownership.
Affordable EMIs: The slash in repo rate boosts homebuyers to opt for more loans. Lower interest rates mean one can secure a loan at more affordable rates, making homeownership more accessible and allowing an individual to borrow a higher amount without significantly increasing their EMI or keep the loan amount the same and enjoy long-term savings.
Owning a dream house is no longer limited to the ultra-wealthy but is now firmly within the grasp of salaried professionals and small business owners. This growing middle class, combined with their evolving need for modern housing, is pushing the demand for homes priced below or Rs 1 crore.
Mid-Income Housing: The mid-income housing segment is the backbone of the surge in home loans under Rs 1 crore. Pune led the way, contributing 30.6% of all home loans disbursed, followed by Hyderabad (22.6%), Bengaluru (17.3%), and Gurugram (14.2%). Gurugram also recorded the highest average loan ticket size, reflecting strong demand for luxury properties. Furthermore, government initiatives like the SWAMIH Fund, aids stalled projects, and easier capital access for developers is expected to drive supply growth, fostering a favorable real estate market.
Housing Loan Market: In addition to government schemes, which play a crucial role in making home loans more accessible, non-banking financial institutions have too broadened their offerings, making home loans more accessible to more population. Numerous banks and home financial companies have introduced more flexible loan products and extended repayment periods, allowing homebuyers to take loans for properties priced under Rs 1 crore with relatively lower EMIs.
Baby boomers favour investments but millennials prefer to upgrade their property. The reasons for purchasing a home show distinct generational difference.
Changing Consumer Behaviour
The real estate sector has undergone significant transformation and has become more systematic, driven by evolving consumer preferences, economic factors, and technological advancements. From changes in construction styles and shifts in property types and demands, the real estate landscape is becoming more dynamic and diversified.
• Developers recognise the growing demand for homes priced within reach of the broader population, leading to the creation of customized housing projects that are budget-friendly, eco-friendly, and smart homes.
• Developers are also focusing on mixed-use developments where residential, commercial, and retail spaces are integrated, providing holistic living and working environments.
• With the shrinking home spaces and expensive urban areas, home buyers seek an alternative in cities' peripheries that are well connected with CBDs. Suburban locations often offer better value-for-money properties, meeting the demands of homebuyers who want more space at affordable prices.
• Millennials (39%) and Gen Z (36%) are leading the trend of upgrading and purchasing for end-use, while Baby Boomers display a stronger interest in investments (29%) and retirement plans (15%). Overall, Indians are upgrading to a better home, reflecting a growing shift towards mid-range and luxury housing.
With rising incomes and lower borrowing costs, the demand for high-value home loans is soaring as consumers increasingly seek premium properties.
The Summary
As India's middle class grows and evolves, the rise in Rs 1 crore housing loans reflects a broader shift in consumer values, due to flexible financial products and government stimulus to housing. According to the Knight Frank report, in terms of financing, about 79% of respondents indicated home loans as their preferred mode for purchasing a home. The trend is well summarized by Shishir Baijal, Chairman & Managing Director, Knight Frank India, in his statement, "The BFSI sector is offering home loans, investment avenues, and risk management tools, combined with emerging technologies and infrastructure advancements that align with India's broader housing development goals." The NHB report reinforces this shift in the housing market, as the mid-income group (MIG) is becoming the backbone of the housing sector, making up 44% of outstanding individual housing loans.
Rise in Women Homebuyers
The number of women homebuyers is steadily rising, with 1.29 lakh residential transactions registered solely by women in 2024, a 14% increase from the previous year across top cities. In comparison, male homebuyers saw an 11% growth during the same period.
The total residential transactions registered with IGR across key cities, Mumbai, Navi Mumbai, Thane, Pune, Bengaluru, Hyderabad, Noida, Greater Noida, and Ghaziabad, reached 5.77 lakh, reflecting a 4% increase from 5.56 lakh in 2023. Notably, according to the report, residential transactions by sole women buyers grew by 14% year-on-year, reaching 1.29 lakh transactions, up from 1.14 lakh. This pushed their share in total residential transactions to 22% in 2024 from 20% in 2023.
Kanika Gupta Shori, COO and Founder of Square Yards, said, "As women gain greater empowerment through education, workforce participation, and financial independence, they are emerging as formidable decision-makers and influential consumers across industries, real estate being no exception." This additional interest from female homebuyers is further boosting the overall home loan demand.
