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    Date: Mar 30, 2022

    HDFC chairman Deepak Parekh sees robust housing demand in India to continue

    Housing affordability levels in the Indian property market are at their highest and are unlikely to be adversely impacted in the near term as incomes are rising faster than real estate prices, said Deepak Parekh, chairman of the country’s largest private mortgage lender, Housing Development Finance Corporation (HDFC).

    “The demand for housing continues to be very strong… The mortgage to GDP ratio in India at 11% is still very low,” Parekh said. “If one looks at the cohort of those working in sectors like IT, ecommerce, professional services, the financial sector, or those working in large companies, or the breed of new-age entrepreneurs, income levels certainly have risen…incomes are rising faster than real estate prices, and, therefore, affordability should not be affected.”

    According to him, the demand for housing in India has come from genuine homebuyers and not speculators. Home prices have stayed fairly stable, low interest rates have helped, and the real estate sector has already self-corrected and recovered from its previous down-cycle.

    Indian residential real estate managed to stage a convincing bounceback across the top seven property markets in 2021 despite the devastating second wave of Covid-19 pandemic.

    A significant rise in homeownership aspirations was supported by developer discounts and offers, government incentives like Maharashtra, Karnataka, Madhya Pradesh, and West Bengal’s stamp duty reductions, and lenders’ maintaining decadal-low interest rates.

    “Peaks and troughs of each housing market cycle typically entail a duration of 6 to 8 years. In short, the Indian real estate market is on an upward cycle, which bodes well for us,” he said while addressing property developers at a CII real estate conference.

    According to him, certain high-end premium projects have witnessed some price rises, but this is not the case across the board. Barring a few metro cities, prices in the affordable housing segment have been stable. The sweet spot for the residential segment is still in the price range of ₹50 lakh to ₹1 crore.

    A small uptick in prices in certain pockets across the country can be absorbed, but it needs to be seen if there is a continued rise in the cost of building materials, which could get passed on to the homebuyer.

    Parekh believes there are, however, measures that can lessen this impact, such as facilitating shorter construction cycles, ensuring faster approvals and enabling credit input on goods and services tax for under-construction properties.

    This would particularly help affordable housing projects.

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