
Stable Interest Rates and Rapid Lending Expansion
After a series of interest rate hikes in 2022, the Reserve Bank of India (RBI) has maintained stable lending rates since February 2023. The Repo Rate is currently at 6.50%, and the Bank Rate is at 6.75%. In August 2024, the RBI’s Monetary Policy Committee (MPC) decided to keep these rates unchanged, focusing on reducing inflation towards the target of 4% while supporting economic growth. The MPC stated, “These decisions align with achieving the medium-term target for consumer price index (CPI) inflation while supporting growth.”
Current Home Loan Rates
Since October 2019, most Indian banks have linked floating-rate retail loans to the repo rate. Consequently, home loan interest rates have remained stable since early 2023, typically ranging from 8% to 11%, depending on the loan type and borrower category.
Here are the current home loan interest rates from selected banks as of August 2024 compared to January 2023:
Bank | August 2024 Rates | January 2023 Rates | Change |
State Bank of India | 8.50% to 9.65% | 8.55% to 10.50% | -0.05 pp |
Bank of India | 8.40% to 10.80% | 8.30% to 10.25% | +0.10 pp |
HDFC Bank | 8.75% to 9.95% | 8.65% to 9.50% | +0.10 pp |
ICICI Bank | 9.25% to 10.05% | 8.40% to 9.50% | +0.85 pp |
Axis Bank | 8.75% to 9.10% | 8.60% to 9.05% | +0.15 pp |
Kotak Mahindra Bank | 8.70% to 8.75% | 8.30% to 9.10% | +0.40 pp |
Bank of Baroda | 8.40% to 11.10% | 8.50% to 10.10% | -0.10 pp |
Punjab & Sind Bank | 8.50% to 10.00% | 8.25% to 9.35% | +0.25 pp |
Indian Overseas Bank | 8.40% to 10.60% | 8.95% to 9.05% | -0.55 pp |
Canara Bank | 8.40% to 11.75% | 8.60% to 10.80% | -0.20 pp |
Growth in Housing Credit
India’s housing credit market has changed significantly due to government support through various policies, including the Real Estate Regulatory Authority (RERA) establishment, the Goods and Services Tax implementation, tax deductions on housing loans, and the “Housing for All” initiative.
The housing credit has rapidly increased, from 3.2% of GDP in 2001-02 to 10.52% in 2022-23. According to the RBI, housing loans from commercial banks (over 80% of total housing credit) surged by 36.5% year-on-year in 2023-24, reaching INR 28,101 billion (USD 336.2 billion) in July 2024. This growth is significantly higher than the average annual growth of 14.6% over the past 15 years.
Future Projections
The growth of residential lending is expected to continue, with brokerage house Nomura projecting that the home loan industry will more than double in the next five years, with a growth rate of 15% over the next decade. Key factors driving this growth include favorable demographics, rising income levels, a housing shortage, and government initiatives for affordable housing.
Socio-Economic Context
Economic Growth Amid Unemployment Concerns
India is currently one of the world’s fastest-growing economies, consistently exceeding growth expectations. From 2021 to 2023, the average annual real GDP growth was 8.17%, according to the International Monetary Fund (IMF). Despite global uncertainties, strong domestic demand and government reforms are driving this growth. The IMF forecasts India’s GDP growth at 6.8% for 2024 and 6.5% for 2025.
Inflation Trends
Nationwide inflation is decreasing, falling from a decade-high of 6.70% in 2022 to 5.40% in 2023, with preliminary data showing it at 4.16% in August 2024. Deloitte projects that inflation will revert to the RBI’s target level of 4% early next year.
Unemployment Challenges
Despite strong economic growth, the labor market remains a major challenge. In 2023, the International Labour Organization estimated India’s total unemployment at 4.2%, with youth unemployment at a concerning 15.8%. However, the Centre for Monitoring Indian Economy estimated unemployment at a higher rate of 9.2% in June 2024.
Experts warn that India’s economy is not generating enough jobs for its growing young population. The labor force participation rate (LFPR) is notably low compared to other Asian economies. Without a concrete employment strategy, India risks missing out on its demographic potential.
Economic Outlook
Fitch Ratings recently affirmed India’s BBB standing with a stable outlook, emphasizing that the country will continue to be one of the fastest-growing economies globally. Continued investment in public infrastructure is seen as a critical growth driver. While policy continuity is expected under the current government, challenges in coalition politics may hinder significant economic reforms.
Get More Updates Here
Stunning Prices for Luxury Apartments in Gurgaon Leave Social Media in Shock (75 Crore)
DLF In Gurgaon: Launching India’s Most Expensive Flats
Property in Delhi: Prices Surge Along Yamuna Expressway
Prime Commercial Space Available For Lease In Greater Noida West Sector 12
Real Estate Market in India Could Reach $10 Trillion by 2047, Says Report