Demand for home loans is strong in India and is expected to increase further in the coming months, the director of major housing finance company Housing Development Finance Corporation said on Monday.
“The economy is buoyant, the feel-good factor is high, affordability is better, so people are comfortable buying homes even if rates are slightly higher,” he told Reuters. Keki Mistry, Managing Director of HDFC.
The central bank has already raised rates three times by a total of 140 basis points this fiscal year to rein in stubbornly high inflation, which has remained above the central bank’s tolerance band for several months.
Lenders passed on higher interest rates, but Mistry said there were no signs of stress among homebuyers and collections on loans remained robust.
Interest rates are set to rise further, with economists expecting at least another 60 basis points by March 2023, according to a Reuters poll.
“The feel-good factor in the economy is so strong that (we) expect festival season to be very strong,” Mistry said, referring to the September-December period.
“I don’t think we’ll see too much interest rate hikes going forward, some increase will be there but don’t think that will discourage buyers,” he said.
Economists agree, with Madan Sabnavis, chief economist at Bank of Baroda, saying in a report late last month that homebuyers would be prepared for fluctuating rates.
Home loans rose 16% at the end of July compared to the same period last year, according to the latest data from the central bank.
Demand is expected to be particularly strong in major Indian cities, where sales had slowed between 2016 and 2020 but where a recovery is now visible, Mistry said.
HDFC-HDFC BANK MERGER
HDFC’s impending merger with the country’s largest private lender, HDFC Bank, in which it has a 21% stake, to create a financial services giant could be completed ahead of the expected 15-18 month deadline, Mistry said. .
Approvals in principle from major regulators, including the Reserve Bank of India, are already in place.
The merger, announced in April, will mark the world’s largest banking industry merger and acquisition since April 2007, according to Refinitiv data.
Mistry said the growth opportunities from the deal are huge.
“There are a lot of cross-selling opportunities, now we need to generate enough liabilities and the bank is already working on that by opening new branches and trying to collect deposits,” he added.
(Except for the title, this story has not been edited by NDTV staff and is published from a syndicated feed.)