Realty sector will reach $1 trn by 2030: Experts

New Delhi: Credit outstanding to the housing sector rose by nearly Rs10 lakh crore in the last two fiscals to reach a record Rs27.23 lakh crore in March this year, according to RBI’s data on ‘Sectoral Deployment of Bank Credit’. Experts from banking and real estate sectors attributed this growth in housing credit outstanding to a strong revival in the residential property market post-Covid pandemic on pent-up demand.

According to the data of the Reserve Bank of India (RBI) on sectoral deployment of bank credit for March 2024, the credit outstanding to the housing (including priority sector housing) stood at Rs27,22,720 crore in March 2024, up from Rs19,88,532 crore in March 2023, and Rs17,26,697 crore in March 2022. The data also showed that the credit outstanding towards commercial real estate stood at Rs4,48,145 crore in March 2024. It was at Rs2,97,231 crore in March 2022.

Industry experts believe the sector will reach $1 trillion milestone by 2030. Karthik Srinivasan, Senior Vice President and Group Head at rating agency ICRA, said the retail housing loans deployed by banks has increased significantly in FY’24 consequent to the merger of Housing Development Finance Corporation Ltd (HDFC) with HDFC Bank effective July 2023. “Mortgage penetration level is steadily increasing in India (around 12 per cent as of March 2024; the amount of housing loans outstanding as a proportion of GDP), but remains relatively lower than developed economies, implying significant room for growth,” he said.

According to reports from various property consultants, housing sales and prices have surged significantly in the past two financial years. When contacted, Madan Sabnavis, Chief Economist with Bank of Baroda (BoB), said the high growth in home loans can be attributed to the housing boom seen across all segments. In particular, Sabnavis said the affordable housing segment has witnessed an uptick due to the government push.

“There was also some pent-up demand for buying homes in the last two years following Covid which is getting reflected here,” he said. Sabnavis said the home loan growth would remain robust, but might taper down to 15-20 per cent due to a higher base.

Commenting on the RBI data, Samir Jasuja, CEO and MD of PropEquity, a leading real-estate data and analytics company, said the rise of housing loans outstanding is primarily due to the significant increase in the quantum of properties launched and sold in the last two fiscal years. “Major Tier-1 cities have witnessed high rates of price appreciation ranging between 50-100 per cent since FY 2021, which has contributed to an increase in average loan size per property,” he explained. Jasuja expects the housing loan segment to remain on an uptrend as demand for residential real estate remains strong.

Indian real estate sector, which supports more than 200 ancillary industries including cement and steel, has been witnessing a strong demand since 2022, after languishing for more than a decade because of subdued sales and stable prices. The real estate sector suffered on account of disruptions caused by new realty law RERA, GST and demonetisation besides trust deficit in the sector as many developers did not deliver projects after taking money from customers.