India’s growing youth population to boost housing demand, predicts HDFC chief

India’s youth boom will drive housing demand for years, the head of India’s largest private mortgage provider has predicted, as rising incomes make homes more affordable in the world’s most populous country.

“What gives me confidence that growth will remain strong for many years is the fact that India has a young population,” said Keki Mistry, chief executive of Housing Development Finance Corporation (HDFC), in an interview with the Financial Times. Mumbai Headquarters of the company.

Mistry said more than half of India’s population is below 30 years of age, while the average first-time home buyer is 37-38.

“All these young people will get to an age where they will need to buy a house,” said the four-decade industry veteran. “In my view, there will be a structural demand for housing and therefore a demand for housing financing.”

Mistry’s comments come as the 68-year-old prepares for partial retirement in a non-executive role as HDFC prepares to merge with India’s largest private lender subsidiary HDFC Bank, in what would be India’s biggest ever corporate combination . The merger is due to be completed in July.

As India’s economy recovers from the pandemic and its population becomes the world’s largest this year, consumers have borrowed faster than companies to buy goods from homes to cars or fund education.

Banks increased the amount of personal loans by 20.6 per cent year-on-year during March, compared to 12.6 per cent in the same month a year ago.

The Reserve Bank of India, which publishes the data, said the boom was “mainly driven by ‘housing loans'”, while credit to industry slowed to 5.7 per cent in March, up from 7.5 per cent growth in the previous year. was slow ,

Mistry said he was not worried about the rapid growth in unsecured lending. “Even in unsecured loans there is no real credit issue that has ever surfaced,” he said, arguing that “regulations in India are extremely stringent”.

Strong home-buying for the year ended March as growth picked up pace in India’s smaller towns and cities helped HDFC 21 percent jump in net profit to Rs.460 billion (about $5.6 billion).

India still has one of the world’s lowest rates of housing debt to GDP, although the ratio has almost doubled every decade this century – from 3.2 per cent housing debt to GDP in 2001-2, 2021- 10.6 percent in 22 – according to the National Housing Bank.

However, rising incomes, relatively stable housing prices and government incentives are making buying a home or apartment a more realistic prospect for many middle-class consumers. “Affordability is much better today than historically,” Mistry said.

Meanwhile, rising interest rates, which have hurt housing demand in other economies, have been barely registered in India where mortgage rates have remained historically high.

“If 1 per cent increases to 4 or 5 per cent, it is a huge increase,” Mistry said. “In India, interest rates were always high, so when rates go up . . . the percentage increase in interest rate is not that significant.”

According to non-bank lender Bajaj Finserv, mortgage interest rates in India range between 9 and 14 per cent. By comparison, the average convertible mortgage rate in the UK was 7.4 per cent in April, according to government figures.

Mistry, who has worked for HDFC since 1981, said consumers have also become increasingly comfortable with taking loans: “The fear of borrowing money, which was there 50 years ago, is not there today.”