Demand for home loans from India’s tier 3 and tier 4 districts have been growing at a faster pace than the top two tier districts, including Mumbai and Delhi (NCR), while the country’s home loan market is likely to double in five years, according to a study by SBI Research.

Total portfolio in terms of outstanding grew over 10 per cent in the financial year that ended in March. The share of housing loans in bank credit has increased to 14.4 per cent in June 2022 from 13.1 per cent in March 2020. Housing contributes around 50 per cent of the personal/retail loans.

Metropolitan regions of Bangalore, Chennai, Delhi(NCR), Hyderabad, Kolkata, Mumbai, Ahmedabad, and Pune are categorised as tier 1. State capitals and evolving areas are categorized as Tier 2.

The rest of the districts are categorised as tier 3 and tier 4 based on their urban population. If the urban population of a rural district is between 26-50 per cent, it is classified as tier 3 and the rest as tier 4.

Home loan demand in the rural areas have been on the rise primarily due to the government’s SVAMITVA scheme. The scheme provides people in the hinterland with the right to document their residential properties, which can then help them to use their properties for economic purposes.

Haryana and Uttar Pradesh, where this scheme has already covered many villages, have more districts where home loan disbursal is increasing at a faster pace,

Research said. Government schemes such as AMRUT, PMAY(U) and Smart Cities Mission have also helped create a holistic ecosystem, it said.

However, in this fiscal year that started April, home loan borrowers have started to shell out more interest on their loans as the central bank has so far raised the repo rate by 140 basis points, leading to the lenders raising the borrowing costs. The Reserve Bank of India-led rate-setting panel is expected to further hik rates this year.

Nonetheless, India’s home loan market, currently valued at Rs 24 trillion, is projected to double in five years.

(With inputs from ANI)

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