Housing loan disbursements increase in Tier 3, 4 cities with more female borrowers


With the implementation of the Survey of Villages Abadi and Mapping with Improvised Technology in Village Areas (SVAMITVA) program and work from home cultivation becoming fashionable, there is an increase in demand for housing loans in Tier 3 and Tier 4 districts. Growth has been recorded more among female borrowers, State Bank of India (SBI) said in a research report.

The number of female housing loan borrowers increased significantly in FY22 in Tier 3 and Tier 4 districts. Among the top 20 districts with the highest proportion of female borrowers in new disbursements of housing loans in FY22 (which are mostly rural), six districts are from Chhattisgarh and three from Gujarat and Haryana each, SBI said.

According to the report, the banks’ housing loan portfolio grew by more than 10% in FY22, with Tier 3 and Tier 4 districts growing at a much faster rate than Tier 1 and Tier 2 districts after the pandemic.

Additionally, housing prices have also shown a significant increase in Tier 3 and 4 cities than in major cities over the past year.

The combined share of Tier 3 and Tier 4 districts in new housing loan disbursements, while low, has also increased steadily over the years. It has now fallen to 36% in FY22 from 32% in FY19, the SBI said.

This growing demand for housing loans in rural districts can be attributed to the SVAMITVA scheme which gives rural people the right to document their residential properties which can then help them use their property for economic purposes.

According to the SBI, Haryana and Uttar Pradesh, where this program has already covered many villages, have more districts where housing loan disbursement is growing at a faster rate.

Central government programs such as AMRUT, PMAY(U) and Smart Cities Mission have played a pivotal role in creating a 360-degree holistic ecosystem that has seen housing demand accelerate in non-metropolitan areas, according to the SBI report.

The share of “housing loans” in “bank credit” increased from 13.1% in March 2020 to 14.4% in June 2022. Housing accounts for around 50% of personal/retail loans.

Homebuyer decisions are increasingly shaped by important intangibles, viz. locality, facilities offered, distance to essentials/needs (education, healthcare, finance), common and exclusive facilities offered and prospects for future growth in the area, as housing also appears as an option safe and reliable investment (in particular, for secondary/tertiary buyers) and not just property prices, the report notes.

In terms of loan size, the SBI said the growth of loans in the Rs 30-50 lakh and Rs 50-100 lakh tranches has been higher in Tier 3 and below districts compared to Tier 1 districts, although their share in total loans is still low in these tranches (combined share of tiers 3 and 4 at 37% and 25% at Rs 30-50 lakh and Rs 50-100 lakh respectively).

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