What Does India's Mortgage To GDP Ratio Imply?

Lucas van Oort/Unsplash

Defined as the share of total mortgages in the economy, the mortgage to GDP ratio is a key indicator of the state of housing finance in a country. 

India's mortgage to GDP ratio today is just about 10 to 11%, while in most emerging economies, this ratio is over 20%, and in advanced economies, it can hover between 60 to 70%.

Zooming In

In fact, this proportion is 18% in China, 20% in Thailand, 31% in Korea, 34% in Malaysia, 38% in Taiwan, 52% in Singapore and 56% in the USA.

In comparison, India's much lower mortgage to GDP ratio reflects the low penetration of housing finance, due to several reasons. 

For housing finance companies (HFCs), this also translates into a very large opportunity for growth.

And The Demand For Housing Is Robust

HDFC Limited's Keki Mistry is quite vocal about it too. He feels that demand for housing and thus mortgage, will remain high for a long time to come because:

📈 As urbanisation picks up, demand for housing will pick up in urban areas.

📈 The Union Budget 2022 will create a ton of new jobs and more people will have more income, resulting in a sustained uptick in demand for housing.

Zooming Out

The other important ratio, between mortgages and new home purchases, should be hovering close to 1, we reckon. (Who buys a home without housing finance anyway? Escobar?)

And as home loans are the most lucrative credit product for banks and HFCs - with low levels of non performing assets (NPAs) to boot - finding a lender to fund your home purchase today is a piece of cake.

That's one more reason we could soon be skirting the 15% ratio between home loans and our GDP. Gentle reminder; the USA is at 56%.