Demand for home and personal loans increases on rising sales and consumer demand

Data from the Reserve Bank of India (RBI) indicates a sharp growth in unsecured home and personal loans. Image: Frédéric Soltan/Corbis via Getty Images

Jhe banking sector has seen a strong recovery in loan demand in the current fiscal year, particularly for housing, personal property and durable consumer goods. Bankers and housing finance companies say there has been a marked uptick in demand, particularly for much of this year. Data from the Reserve Bank of India (RBI) indicates a sharp growth in unsecured home and personal loans.
“We are seeing a real uptick,” says Ambuj Chandna, president of consumer assets at Kotak Mahindra Bank, speaking of consumer spending on vacations, weddings and consumer products. This increased the demand for loans.
Kotak Mahindra Bank reported 77% year-on-year growth and 15% sequential quarterly growth in the personal, business and consumer goods segment to Rs 11,616 crore for the quarter ending June, from Rs 6,561 crores of rupees a year earlier. “The unsecured lending segment is where we see a real customer need and are responding to it,” Chandna told Forbes India.
It should be noted that in recent years it has been easier for banks to underwrite for new borrowers (those taking loans for the first time), due to the growing transaction footprint. Also Read: Holiday Season Demand: Ecommerce Logistics Players Brace for a Heavy Load
Although interest rates have risen in recent quarters, dampening loan demand to some extent, this is unlikely to alter the momentum.
Demand for home loans increased steadily throughout the year as residential home sales saw increased demand due to low home loan rates as well as lower inventory in major cities.Also Read: Festive Season Demand: Joy Lacks in Rural Markets
In the financial year ending July 2022, home loans increased by 16.2% to Rs17.69 lakh crore. This compares to a growth of 10.7% in the previous year ending July 2021. In the unsecured personal loan segment, loans grew by 13.2% to Rs 9.34 lakh crore, in the year ending July 2022, according to RBI data.
“Demand will start to pick up at the start of the festival season, while the usual deliveries/possessions will start happening in the second half of October,” said Rahul Mehrotra, Managing Director and CEO of Religare Housing.
But he warns that rising interest rates could act as a drag. “The increase in the return on investment on home loans has had a dampening effect on buyer sentiment, but not enough to significantly reduce sales momentum,” he told Forbes India. “There was an overall increase of about 1.4% in the repo rate, which translated into about a 1.2-1.5% increase in ROI across various lenders.”Read also: Demand for household appliances during the end-of-year holidays, white goods at half mast in the first half of 2022; likely to resume in H2
Research analysts at Motilal Oswal, in an August 29 report, believe that while the demand environment will need to be monitored due to the challenging macro environment, “systemic credit growth is expected to reach growth of around 12% in FY23 and 13.5% in FY24″.

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