Home loans grow much faster in Tier 3, 4 districts compared to metros: SBI research report

New Delhi: Home loan portfolios in Tier 3 and Tier 4 districts are growing at a much faster rate than Tier 1 and Tier 2 districts after the pandemic, a study by SBI Research has shown.

The total portfolio in terms of outstandings increased by more than 10% during the year ending in March.

The share of housing loans in bank credit increased from 13.1% in March 2020 to 14.4% in June 2022. Housing accounts for around 50% of personal/retail loans.

The metropolitan areas of Bangalore, Chennai, Delhi (NCR), Hyderabad, Kolkata, Mumbai, Ahmedabad and Pune are considered Tier 1, and state capitals and developing areas are categorized as Tier 2.

The other districts are classified into levels 3 and 4 according to their urban population. If the urban population of a rural district is between 26 and 50%, it is classified as Tier 3 and the rest as Tier 4.

The rising trend in demand for home loans in rural districts can be attributed to the SVAMITVA scheme, which provides rural people with the right to document their residential properties, which can then help them use their property for economic purposes.

Haryana and Uttar Pradesh, where this program has already covered many villages, have more districts where home loan disbursement is growing at a faster rate, SBI Research said.

Additionally, central government programs such as AMRUT, PMAY(U) and Smart Cities Mission have played a pivotal role in creating a holistic ecosystem that has seen housing demand accelerate in non-metropolitan areas, a he declared.

The research further indicated that India’s home loan market, currently valued at $24 trillion is expected to double over the next 5 years, reflecting the general trend of the country’s aspirations to become a $5 trillion economy.

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James V. Hayes