Smaller towns and peripheries of bigger cities have seen higher growth in home loan disbursement as compared to the top seven cities of the country, says a report by real estate consultancy firm JLL India.
The home loan market grew by 12% across the top seven cities between March 2013 and March 2019, while the growth figure stood at 19% for the rest of India.
This means that the data clarifies the common perception that leading big cities of India drive residential real estate growth.
In its latest report, JLL India said improved connectivity, economic prospects and lower land cost are the factors that have spurred higher residential growth in smaller cities, which is reflected in rising home loans.
The urban sprawl and the growth in peripheral regions have created new districts that are apt for a better investment.
India’s home loan market growth stood at Rs 11.5 trillion as of March 2019, growing at CAGR of 16% over the last six years. The loans across the top seven metro cities grew from Rs 1.8 trillion to Rs 3.6 trillion during the time while it grew from Rs 2.8 trillion to Rs 7.9 trillion in the rest of India.
The report is based on district wise outstanding home loans by scheduled commercial banks during March 2013 and Mar 2019. These districts have the presence of top metro cities and Tier-I/II/III cities.
It also highlighted that peripheries of metro cities have clocked higher growth. So, in the case of Chennai, the city saw loans growing at 8% while Kanchipuram grew by 35%.
This growth has been driven by higher demand for mid-income and affordable housing segments. Demand for housing shifted to suburban regions as home buyers looked for homes that were within their budget, according to a report.
Moreover, lower land cost, larger land parcels and integrated amenities attracted homebuyers looking for aspirational homes at affordable prices, it added.
Emphasizing the importance of Tier II and III cities, the report said the next growth opportunity lies in these towns. It said 45 districts are comprising prominent tier-II and tier-III cities that have registered higher growth than the national average.
For instance, in North India, Varanasi (24%) and Moradabad (23%) topped the list of loan growth. In West, Gandhinagar (33%) and Surat (26%) led the deck.
Meanwhile, in South India, Kanchipuram (35%) and Thiruvallur (30%) were frontrunners. In East India, North 24 Parganas clocked a growth of 24%.
Most of these cities, as the report said, have been driven by manufacturing or services sectors like ceramic tiles, diamond processing, tourism, textiles, leather industry, agro-processing, automobiles, engineering goods, etc.
The economic growth over the years has been complemented with improving connectivity, infrastructure growth, better education and health care facilities leading to improvement in living standards.