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

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.