The mortgage industry in India has grown at an alarming rate. The growth in rates has increased around 40% over the period of last four years. Due to the boost in the Indian real estate market, the property rates have witnessed exponential growth. According to expert reports, there are very less chances of getting any significant decline in growth rates in near future. Hence, at this point of time it becomes essential to examine the main factors that are responsible in triggering such a high growth period.
Following are the key factors that have contributed to the growth of the home loan market.
On the Demand Side:
With the boom in real estate market, owing a property has become an excited investment option. The faster rise in income as compared to property rates has contributed a lot. It is the first and most important factor responsible in increased growth of housing market. Increased income has made housing comparatively more affordable than the past. The second most important factor that is responsible for the growth of home loan market is the declined home loan interest rates. It has instrumented a lot in reducing the cost of servicing a loan. The third factor is the tax benefit which has resulted into more affordability in both borrowing the capital and paying off the interest. Another responsible factor on the demand side is the home as the most excited investment option
On the Supply side:
It has been noticed that some of the factors have contributed a lot in the growth of home loan market in India. Due to boost in real estate, many companies in India are inspired to lend money to the aspiring people to own a house. Housing finance is the prime factor in the competition to increased supply. More and more financial institutions and lenders are offering lower interest rates for home loans. Sometimes interest rates are offered even at the cost of profit margin. Second important factor which is responsible for the growth of the home loan is the fee charged by financial institutions to avail the home loan. In last few couple of years, the fee has been reduced over 2% of the loan amount to 0.25%. Sometimes the institutions are also in the mood to waive off the fee entirely. The housing finance industry is facing strong competition where many housing finance companies offer several new home loan products to meet the needs of wide variety of customers. The third factor on supply side is the increased association between builders and housing finance companies. Such collaboration ultimately results into minimized service and funding related costs.
