The Covid-19 pandemic took a toll on the capacity of the low-income group (LIG) to buy a home in FY21, going by housing finance bellwether HDFC’s loan approval numbers.
However, the appetite of the higher income group (HIG) and middle-income group (MIG) on this count remained undiminished.
In the LIG segment (annual income: above ₹3 lakh to ₹6 lakh) in number terms, housing loan approvals declined to 27 per cent of overall approvals in FY21 from 30 per cent in FY20, as per HDFC’s investor presentation.
In value terms, too, housing loan approvals in the aforementioned segment were down to 14 per cent of overall approvals against 16 per cent.
This trend could be attributed to buyers’ sentiments getting impacted due to the pandemic, which triggered job losses and salary cuts as trade and industry hunkered down, resorting to desperate cost-cutting measures to stay afloat.
HIG and MIG fare better
Housing loan approvals in the case of the HIG segment (annual income: above ₹18 lakh) in number terms rose to 19 per cent of overall approvals in FY21 from 17 per cent in FY20, as per the presentation.
In value terms, housing loan approvals in the HIG segment were up to 40 per cent of overall approvals against 36 per cent.
In the MIG segment (annual income: above ₹6 lakh to ₹18 lakh), housing loan approvals showed disparate movement in number and value terms .
In number terms, MIG housing loan approvals moved up to 48 per cent of overall approvals in FY21 from 47 per cent in FY20.
However, in value terms, housing loan approvals declined to 44 per cent of overall approvals from 46 per cent. This probably indicates that the cost-conscious MIG segment drove a hard bargain with property developers, who were sitting on huge unsold inventory.
Housing loan approvals to the EWS segment (annual income: up to ₹3 lakh) remained unchanged at 6 per cent in number terms and 2 per cent in value terms of the overall loans approved.
Average home loan size up
In sync with the increased number of home loan approvals to the HIG and MIG segment, HDFC’s average home loan size rose to ₹29.5 lakh in FY21 from ₹27 lakh in FY20.
The average loan to value (the amount of loan that a lender gives relative to the property’s value) declined to 69 per cent from 70 per cent at origination.
The average home loan term and the average age of the borrower came down by a year to 11 years and 38 years, respectively, in FY21.