The pandemic years have been a fillip for many sectors related to real estate. One of the trends to emerge has been that the average age of home loan borrowers has decreased. At present, even 23-25-year-old earners are applying for home loans. About a decade back, this average was 35-38 years, says Raoul Kapoor, co-CEO of retail loan distribution company Andromeda.
There is a wide range of reasons behind this trend. One is prevailing low interest rates on home loans. “Another reason is confidence in earning capability for the next few years. This can be seen particularly in the IT sector,” says Kapoor.
Pressure from families or parents is also driving young earners towards buying houses. “Many potential borrowers have shared that their parents want them to buy a house because according to them it’s better to spend the money paying an EMI than on lifestyle expenses,” says Kapoor. Some available credit history thanks to credit card usage by first-time borrowers helps in assessment, he adds.
To tap into newer non-metro segments of potential borrowers, banks are tying up with fintech firms and loan distribution companies, which has led Andromeda to increase its branch network to 300 in FY2022 from 251 a year ago. In the current financial year, the company aims to expand to 325 branches. “There is a huge untapped market in tier-3 and -4 locations, especially in segments such as loan against property, business loans and personal loans,” says Kapoor.
Owing to increase in lending in metro, tier-1 and other locations, Andromeda’s loan disbursal has grown 1.5 times in FY2022 to Rs 38,462 crore from Rs 15,575 crore in FY2021. Home loan disbursals have more than doubled (129 per cent) during the same period, from Rs 7,838 crore to Rs 17,993 crore. The company aims to increase this to Rs 28,966 crore in FY2023.
The growth momentum has been even stronger in the loan against property segment as well, according to a Press statement by the company. The disbursals were worth Rs 13,060 crore, “almost three times of Rs 4,268 crore in FY2021,” it states. For the current financial year, the target is Rs 17,848 crore.
While the growth momentum in loans is expected to continue this year, some challenges exist. Continued high inflation, increase in loan interest rates, non-performing assets and threats to the economy could affect loan growth, says Kapoor.
In this backdrop, technology will continue to play a significant role for big as well as small lenders and associated businesses. Assessment of potential borrowers will get strengthened as various data points will be considered. However, says Kapoor, assessments based on things like social media posts will not be of high relevance.