Banks See Strong Growth in Home Loan Portfolios Despite Rising Interest Rates

Banks in India are experiencing significant growth in their home loan portfolios, with a remarkable expansion of over 15% reported in the third quarter of the current fiscal year. Despite a continuous rise in interest rates on home loans over the past two years, which saw the weighted average lending rate surpassing 9%, demand for home loans has not diminished.

Major banks such as ICICI Bank, Bank of Baroda, Punjab National Bank, Kotak Mahindra Bank, and State Bank of India have all recorded notable increases in their home loan portfolios during this period. HDFC Bank, post-merger with HDFC Ltd, also reported healthy double-digit year-on-year growth, attributing it to a wider distribution network and improved processing turnaround times.

The surge in demand for home loans during the third quarter is a common trend, as families often prefer to make property purchases before and during festivals. Builders also take advantage of this period to launch new residential projects, further fueling demand from homebuyers.

Despite the impact of high interest rates, the demand for home loans remains strong, underscoring the fundamental importance of homeownership in the country. Industry experts believe that the need for housing outweighs the effect of elevated interest rates, reflecting the resilience of the market.

Banks attribute this resilience to the enduring significance of homeownership, even amidst adjustments in monetary policy by the Reserve Bank of India, which has raised the policy rate by 250 basis points since May 20. With a renewed focus on segments like self-employed individuals and expanded product offerings, banks are optimistic about sustaining this growth momentum in the future.