Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

Can this boost home loan growth?
Thu, 24 Jan Pre-Open

Roti, kapda aur makaan are the three basic necessities of life. So, why is the level of mortgage penetration in India abysmally low? Housing loans as a percentage of GDP have remained at around 7% in India. This is significantly lower than the levels achieved in most developed countries and even other Asian markets. It indicates an opportunity for further penetration of mortgage loans. With improving demographics, considering 60% of India's population is below 30 years of age and economies of scale, the mortgage to GDP ratio is likely to increase going forward. Increased urbanization is also expected to be a strong driver of growth. 70% of India's GDP and 7 out of 10 jobs are expected to be created in urban cities over the next 20 years. This will help drive housing demand within cities, as well as the creation of more cities to house the growing population.

But, are regulations in favour of this? Well, a Reserve Bank of India (RBI) committee recently announced a number of borrower friendly measures to increase the same. It has favoured introduction of fixed rate loans for a period of up to 30 years and asked banks to look at charging a 'reasonable' pre-payment penalty on the outstanding amount only. Fixed rate loans with duration of 7-10 years may also be introduced in addition to vanilla fixed-rate loan products. These longer-term loans will help reduce the EMIs of borrowers and may make certain properties more affordable. Plus, these will also help borrowers against interest rate fluctuations. The pre-payment penalty on fixed rate loans should be reasonable, so it doesn't act as a disincentive for fixed rate borrowers. On the other hand, pre-payment penalties for floating rate loans have been abolished.

In order that banks do not face an asset-liability mismatch (funding long term assets with short-term liabilities) the RBI has recommended that banks popularize their 5+ year tenure fixed deposit schemes, which are exempt from taxes. These will help banks meet their long-term funding needs. Plus, large institutional investors like pension funds, provident funds, and insurance companies should be encouraged to invest in bonds issued by banks. Banks can also opt for the take-out financing route. All in all, we believe that these recommendations are beneficial to borrowers. These may increase investment in housing and real estate which has been facing a slump of late on account of prohibitive prices.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary

What else is happening in the markets today? Dig in...

Equitymaster requests your view! Post a comment on "Can this boost home loan growth?". Click here!


Stock Market Updates

J&K BANK Share Price Up by 8%; BSE BANKEX Index Up 2.8% (Today's Market)

Mar 3, 2021 03:35 PM

J&K BANK share price is trading up by 8% and its current market price is Rs 32. The BSE BANKEX is up by 2.8%. The top gainers in the BSE BANKEX Index are J&K BANK (up 7.6%) and RBL BANK (up 5.2%).

RELIANCE IND. Share Price Up by 5%; BSE OIL & GAS Index Up 1.3% (Today's Market)

Mar 3, 2021 03:27 PM

RELIANCE IND. share price is trading up by 5% and its current market price is Rs 2,216. The BSE OIL & GAS is up by 1.3%. The top gainers in the BSE OIL & GAS Index is RELIANCE IND. (up 5.1%). The top losers are PETRONET LNG (down 0.1%) and BPCL (down 0.4%).

AU SMALL FINANCE BANK at All Time High; BSE BANKEX Index Up 2.8% (Today's Market)

Mar 3, 2021 03:23 PM

AU SMALL FINANCE BANK share price has hit an all time high at Rs 1,224 (up 4.2%). The BSE BANKEX Index is up by 2.8%. Among the top gainers in the BSE BANKEX Index today are AU SMALL FINANCE BANK (up 4.2%) and KOTAK MAHINDRA BANK (up 3.0%).

REDINGTON Share Price Down by 5%; BSE 500 Index Up 1.9% (Today's Market)

Mar 3, 2021 03:13 PM

REDINGTON share price is trading down by 5% and its current market price is Rs 200. The BSE 500 is up by 1.9%. The top gainers in the BSE 500 Index are IFCI (up 19.9%) and IDBI BANK (up 12.1%). The top losers are REDINGTON (down 5.1%) and SYMPHONY (down 5.1%).

RBL BANK Share Price Up by 5%; BSE BANKEX Index Up 2.7% (Today's Market)

Mar 3, 2021 03:09 PM

RBL BANK share price is trading up by 5% and its current market price is Rs 249. The BSE BANKEX is up by 2.7%. The top gainers in the BSE BANKEX Index are RBL BANK (up 5.0%) and FEDERAL BANK (up 5.7%).

Sensex Trades Over 500 Points Higher; Dow Futures Up by 147 Points (Today's Market)

Mar 3, 2021 12:30 pm

BSE Sensex is trading up by 586 points, while the NSE Nifty is trading up by 190 points.

View More Indian Share Market News

Most Popular

It's the Beginning of a New Bull Phase in Smallcaps(Profit Hunter)

Feb 24, 2021

Last time the smallcap index crossed 19k a big correction followed. Here's what makes it different this time.

Make Rs 5,000 Per Day Trading the Market(Fast Profits Daily)

Feb 25, 2021

In this video, I'll show you how to get started on the path to daily trading profits.

I Believe the Investment of the Year Will Be...

Feb 19, 2021

In this episode, ace trader Brijesh Bhatia talks to us about the best investments of 2021, his profitable trading system, and much more.

The Hidden Tesla in My Great Indian Wealth Project(Profit Hunter)

Feb 23, 2021

An Indian company founded three decades ago in a garage caught my attention...


India's #1 Trader
Reveals His Secrets

Secret To Increasing Your Trading Profits Today
Get this Special Report,
The Secret to Increasing Your Trading Profits Today, Now!
We will never sell or rent your email id.
Please read our Terms


Mar 3, 2021 (Close)