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Small towns corner 80% home loans | India News

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CHENNAI: There has been a boom in demand for home loans in tier-2 and -3 cities and towns due to the hybrid working model, expansion of MSMEs and smaller ancillary businesses, besides the post-pandemic recovery in these locations. Leading housing finance companies have recorded 60-80% of their sanctioned home loans emerging from tier-2 and -3 cities during the first quarter of the current fiscal.
The demand from the southern states is on the higher end. At the same time, experts in the real estate sector said the recent hike of 50 basis points (100bps = 1 percentage point) by the RBI could affect sentiment of homebuyers, causing a short-term impact in sales.
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One of the five largest affordable housing finance companies, Shriram Housing Finance, has disbursed home loans to the tune of Rs 500 crore in Q1 of FY23 in non-metro locations, accounting for 63% of total disbursements. MD & CEO Ravi Subramanian said the number and value of loan applications have seen an uptick compared to last year from the non-metro regions.
Another major player in housing finance, Sundaram Home Finance, sanctioned home loans amounting to Rs 588 crore in Q1 of FY23, a substantial increase from Rs 213 crore in the year-ago period. Of this, over 60% of home loans were from tier-2 and -3 locations, when compared to around 35% in the corresponding period of the previous financial year. MD Lakshminarayanan Duraiswamy said, “Affordability has gone up in these locations.”
Gaurav Mohta, chief marketing officer at Home First Finance Company, said nearly 80% of their total home loan disbursements have come from tier-2 and -3 cities during the first quarter of this fiscal.
Meanwhile, leading real estate advisory JLL said RBI’s repo rate increase of 50bps is likely to result in some ripple effect in the upcoming festive season. “This could see some short-term disruption to the sales growth momentum. It is, however, a note of caution and not a reflection on the overall residential sector’s health, with the medium- to long-term growth prospects remaining intact,” said Samantak Das, chief economist, and head of research and REIS, India, JLL.

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