India lags significantly behind in terms of the share of urban population when compared with countries such as Japan, Brazil, the US, Russia, Indonesia and China, among others. However, prevailing trends and future projections indicate that India is rapidly urbanising. The National Commission on Population (NCP) in India predicts that in the next 15 years (i.e., by 2036), about 38.6% of Indians (600 million) will live in urban areas. This is driving the need to strengthen urban infrastructure, including housing infrastructure.
Over a period of time mortgage penetration increased from 7.8% of GDP as on March 2014 to 11.2% of GDP as on September 2020, yet it remains lower than other countries, such as Thailand, China, Germany, Malaysia, among others. This provides significant opportunity for the mortgage sector to grow in the coming years.
The Government of India prioritised affordable housing to address the country’s housing shortage and launched the Pradhan Mantri Awas Yojana in 2015 to provide housing for all by 2022. Despite challenges in the real estate sector in the past two years, the affordable housing segment reported robust growth owing to various government/regulatory initiatives, and softening of interest rates. According to reliable industry sources, the housing sector in India is seeing the best affordability in 2.5 decades. The Union Budget FY 2021-22 allowed additional interest deduction of ₹ 1.5 lakhs for loans sanctioned between April 1, 2021 and March 31, 2022. This is meant to encourage first-time home buyers (house cost up to ₹ 4.5 lakhs).
There has been a growing shift among companies towards investing in emerging technologies to build long-term resilience. Besides, the pandemic drove organisations to heavily collaborate through digital tools, recognise the value of new-age technologies and enable online and digital formats of business development and operations. The NBFCs are using technology more than ever and harnessing partnership ecosystems across the value chain of lead generation, customer onboarding, underwriting, credit/loan disbursement and collection. Artificial intelligence (AI), machine learning (ML) and big data are equipping lenders to measure individual customer insights and build alternative credit scoring models.