Affordability: A Concern for New Home Buyers

Bangalore: Housing finance penetration has been static for the last five years, said ICRA report. It was noted that the level of penetrations are much lower compared to that in the developing economies.

"Housing Finance penetration in India increased from 4.5 percent as on Mar-04 to 7 percent as on Mar-07 however has remained at these levels over the last 5 years. This figure is however significantly lower than the penetration rates in developed countries" said the report of ICRA, reports Gayatri Nayak of Economic Times.

Housing finance is facing challenge mainly because of hike in property prices and tough operating environment, which leads to the decline in affordability for new home buyers as property prices are increasing at a faster rate than growth in income levels.

Though housing loan market grew by 10 percent in 2011-12, the overall housing credit outstanding amount is 6261 billion in last quarter of 2011-12 compared to 5345 as the same period last financial year, which indicates a rise of 17 percent, according to ICRA’s estimation.

Even if the property prices are heading north and the country is witnessing a decline in property transactions there could be a 17-19 percent growth of the Indian mortgage market by 2013. This is because most of the major banks have lowered the home loan rates and are offering attractive schemes.

There is a decline in affordability level among new home buyers due to the increase in property prices, lower rise in income levels, hike in interest rates and high rate of inflation, said ICRA report.

Also Read: Price Appreciation in Housing Segment Slowed in 2012