The head of India’s biggest private mortgage provider has forecast that India’s youth bulge will propel demand for housing for years, as rising incomes in the world’s most populous country have made homes more affordable.
“What gives me confidence that the growth will remain strong for a number of years is the fact that India has a young population,” said Keki Mistry, chief executive of Housing Development Finance Corporation (HDFC), in an interview with the Financial Times at the company’s Mumbai headquarters.
Well over half of India’s population is aged under 30, while the average first-time homebuyer is aged 37-38, said Mistry.
“All these younger people will get to an age where they will necessarily need to buy a home,” added the four-decade industry veteran. “To my mind, there will be a structural demand for housing and therefore demand for housing financing.”
Mistry’s comments come as the 68-year-old readies for partial retirement into a non-executive role, as HDFC prepares to merge with subsidiary HDFC Bank, India’s biggest private lender, in what will be India’s largest ever corporate combination. The merger is scheduled to complete in July.
As India’s economy has recovered from the pandemic and its population grown to become the world’s largest this year, consumers have borrowed faster than companies in order to buy goods from houses to cars or fund education.
During March banks increased the amount of personal loans they wrote by 20.6 per cent year on year, compared with 12.6 per cent in the same month a year earlier.
The Reserve Bank of India, which publishes the data, said the jump was “primarily driven by ‘housing loans’”, while lending to industry grew at a more sluggish 5.7 per cent in March, slowing from a 7.5 per cent increase the previous year.
Mistry said he was unconcerned about the rapid growth in unsecured lending. “Even in unsecured loans there’s not been any real credit issue which has ever cropped up,” he said, arguing that “regulations in India are extremely tight”.
Robust house-buying spurred a 21 per cent jump in HDFC’s net profits for the year ending this March, to Rs460bn (about $5.6bn), as development ramps up in India’s smaller towns and cities.
India still has one of the world’s lowest rates of housing loans to gross domestic product, although that ratio has almost doubled every decade this century — from 3.2 per cent housing loans to GDP in 2001-2, to 10.6 per cent in 2021-22 — according to the National Housing Bank.
However, rising incomes, relatively stagnant housing prices and government incentives are making house- or apartment-buying a more realistic prospect for many middle class consumers. “Affordability today is a lot better than what it historically has been,” said Mistry.
Meanwhile, rising interest rates, which have hurt housing demand in other economies, have barely registered in India where mortgage rates have historically been high.
“If 1 per cent goes up to 4 or 5 per cent that’s a massive increase,” said Mistry. “In India, interest rates were always high, so when the rates go up . . . the percentage increase in the interest rate is not that significant.”
Mortgage interest rates range between 9 and 14 per cent in India, according to non-bank lender Bajaj Finserv. In the UK, by comparison, the average variable mortgage rate stood at 7.4 per cent in April, according to government statistics.
Mistry, who has worked for HDFC since 1981, said consumers had also become increasingly comfortable with taking loans: “The fear of borrowing money, which was there 50 years ago, is not there today.”