InvestorQ : Is it possible that the Indian mortgage funding market will double in five years?
Archita Jajjoo made post

Is it possible that the Indian mortgage funding market will double in five years?

Niti Shenoi answered.
7 months ago

When such projections from no less a person than Deepak Parekh, you do take projections seriously. After he invented the mortgage finance industry in India via HDFC. In a recent interview, Parekh talked about India doubling its home loans from the current $300 billion to $600 billion in the next 5 years. That is roughly Rs46.6 trillion in rupee terms. What Parekh is betting on is that this would be a logical outcome as India surges to become a $5 trillion economy over the next 4-5 years.

On needs to remember that India’s $5 trillion GDP dream was interrupted by COVID. However, thanks to fiscal and monetary policy support, the Indian economy looks poised to grow from GDP of around $3 trillion to $5 trillion over next five years. Here housing has a key role to play because this will coincide with surge in Indian economy. Parekh also feels that the mortgage market should now occupy a bigger share of GDP. Here is why.

The current mortgage market is around 11% of GDP at a time when the median benchmark for Asian economies is closer to 30%. Now, even if the mortgage market doubles to $600 billion, it will only be around 12% of the GDP. So the surge in the mortgage ratio is still the big open opportunity. So the ratio improving to 18% is also a great boost. But there is more to it. Housing demand has strong externalities and it reflects rising standard of living of people.

There is a reason the Indian mortgage market in a sweet spot. He feels things will be better if housing finance companies are merged with banks, which is what HDFC is doing. It will be all about a larger pool and lower costs. Post the 2007 crisis, housing market has never been the same. That could see a big change.