Real estate slowdown a myth? Home loan disbursements grew 23% in 2016-17

NHB data show a win for affordable housing; loans of up to Rs 25 lakh were 76% of all disbursements

Have you been hearing that there is a slowdown in the real estate sector and the market has come to a standstill? Well, you might have been interacting with real estate players. While many housing companies and developers have been complaining that consumers have stopped buying or investing in homes, numbers seem to suggest otherwise.
 
According to the National Housing Bank (NHB) data for 2016-17, disbursement of home loans of less than Rs 25 lakh in value – mostly used for buying affordable housing units and accounting for the bulk of the number of home loans disbursed – grew at a healthy rate of 33 per cent over a year earlier.
 
There, however, was a decline of one per cent in the number of home loan disbursements of over Rs 25 lakh in value. Call it a slowdown if you will, but this segment accounts for less than a fourth of the total number of home loans disbursed.
 
NHB collates data from public-sector banks and housing finance companies which account for a majority of loans given out in India.
 
Significantly, the share of loans of more than Rs 25 lakh in the total number of units for which home loans were disbursed came down to 24 per cent from 30 per cent the previous year. This implies that in 2016-17 a higher number of people preferred to seek loans of smaller denomination when compared with 2015-16. Also, despite a decline in the number of loans bigger ticket size, the total number of loan disbursements during the year grew 23 per cent.
 
Another interesting change in loan disbursement trends in 2016-17 was a massive increase of 48 per cent in the number of loans of up to Rs 2 lakh – that might be obvious, given the Narendra Modi government’s thrust on affordable housing and ‘Housing for all by 2022’.
 
Real estate companies seem to agree with the trend. Anil Bhalla, chairman of Gurgaon-based Vatika group, says: “There is a huge upside in residential houses priced below Rs 1 crore. These buyers are not speculators. That is clear from the fact that 4,500 of the 6,000 dwelling units we delivered in one of our projects has been occupied.”
 
Bhalla, however, agreed that there is very little demand for high-end housing.
 
Sukanya Kumar, founder and director of Bangalore-based RetailLending.com, which is in the retail housing business, says: “The trend in markets is quite clear. We are seeing a high demand for houses priced under Rs 50 lakh, but there are very few takers for homes worth over Rs 1 crore. The reason behind the noise around “real estate slowdown” is mainly because units in the affected segment – homes with price tags of Rs 1 crore or more – are mostly in large cities, which attract a lot of attention.