This Diwali, home loans demand is likely to more despite EMIs getting costlier. Here’s why

By Anil Gundmi Last updated Oct 9, 2022 - 4: 26 pm

This Diwali, more Indians are likely to seek long-term investments, and buying a house will be one of them. Such in return will drive home loans to demand and further accelerate the credit growth of financial institutions like banks and NBFCs. This Diwali, home loans demand is likely to more despite EMIs getting costlier. Here’s why.

The October month is packed with long holidays due to back-to-back festivals. After Navratri, citizens are now waiting for the cheer of the Diwali season. In the post-pandemic era, the demand in the real estate sector is buoyant and consumer sentiment has turned upbeat for this festive season. This Diwali, more Indians are likely to seek long-term investments, and buying a house will be one of them. Such in return will drive home loans to demand and further accelerate the credit growth of financial institutions like banks and NBFCs. This Diwali, home loans demand is likely to more despite EMIs getting costlier. Here’s why.

It needs to be noted that during the festive season, home buyers tend to invest in properties. The upcoming festival is expected to be no different especially currently when the real estate sector has made a strong comeback after the pandemic. Buying affordable homes is likely to pick up momentum. Home loans are one of the mediums for buying a dream house as they eliminate the need for lumpsum cash. Home loans have flexible tenures and reduce the burden of gathering hefty cash to buy houses since you can repay your dues via equated monthly instalments (EMI). Also, there are tax benefits of ₹1.5 lakh applicable on your home loan principal amount under section 80C of IT ACT, among others.

This fiscal year FY23, RBI hiked the repo rate by 190 basis points in the four consecutive policies to 5.9% which forced banks and NBFCs to hike home loan interest rates making EMIs costlier. However, the demand for affordable housing stays robust and the festive season is likely to set a path for strong growth in the sector.

The 5-days Diwali festival will begin on October 22 with Dhanteras followed by Lakshmi Pujan (Main Diwali) on October 24 and to end on October 26 with Bhai Dooj.

According to Sahil Shah – Director, Investments at Certus Capital and Earnnest.me., the real estate sector has made a tremendous comeback after the pandemic. CY2022 is shaping up to be one of the best years for residential sales in almost a decade after prices remained practically flat, in real terms, between 2015 and 2021. Another factor driving people to buy homes is their experience during the lockdown when they were restricted to staying within four walls.

Shah added that “Today, most are looking to buy/upgrade to the best home they can afford. COVID-19 also shifted the focus towards spacious homes, away from densely packed cities. For the more affluent / HNI segment, second homes have emerged as a sought-after option, both from an investment and long-stay use perspective. Finally, there is a certain migration from tier 1 cities to tier 2, as certain sectors embrace, especially tech, embraced remote working.”

Meanwhile, Manish Sheth, MD & CEO, of JM Financial Home Loan believes there are factors that will spark stronger demand for housing loans in the upcoming festive period. He said, “We need to understand that as the Indian economy bounces back above pre-covid levels of activity, the same trend will be seen with consumer spending.”

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“We can expect more Indians to be splurging on essentials that will include homes. Homeownership has become a necessity rather than a luxury. If we are to analyse credit growth rates across the different geographies and sectors in India today, it is clear that we are at the start of a long-term upcycle and it seems improbable that demand will wane anytime soon. The monsoon this year has been good and the mood is upbeat among upcountry consumers as well,” Sheth added.