As many as 50 peripheral cities have witnessed higher home loan growth ranging from 15 percent to 36 percent during the period between the financial year 2012 to 2013 and financial year 2017 to 2018 as against 8 percent to 12 percent growth observed across districts in metros such as Delhi, Mumbai, Chennai and Kolkata during the same period, as per a report.
Some of these Tier II and Tier III cities include Gandhinagar (29 percent), Surat (26 percent) and Jaipur (25 percent) in the West; Varanasi (26 percent), Moradabad (25 percent) and Meerut (18 percent) in the North; Bilaspur (24 percent) and Indore (14 percent) in Central India; Howrah (24 percent) and Patna (21 percent) in the East and Kanchipuram (36 percent) and Thiruvallur (29 percent) in the South, the report said.
Factors such as improved connectivity, infrastructure growth, better education and health care facilities have supported the growth of peripheral cities. Housing sector has been reaping the benefits of the growth story.
During this period, India's home loan market grew from Rs 4.6 to Rs 9.7 trillion, exhibiting a CAGR of 16 percent, indicating healthy demand for housing, according to the JLL Research analysis of the latest RBI home loan data.
"The home loan data demystifies the common perception that districts comprising the top leading cities, Mumbai, Delhi, Chennai and Kolkata, drive residential real estate growth. The data clearly indicates that with development focus gradually reaching to peripheral regions, tier II and III cities of the country have attracted the homebuyers' interest," said Ramesh Nair, CEO & Country Head, JLL India.
The share of these top four districts to the overall outstanding home loans in the country has dropped to 16 percent from 22 percent during the same period. In comparison to this, the share of rest of India has increased to 84 percent from 78 percent, he says.
"Real estate developers in these cities have also been adopting the latest construction and development trends and have been able to provide homes at competitive rates mainly due to lower land and manpower costs," added Nair.
The initial phase of growth in home loans in tier-II and tier–III districts was driven by balance transfer of loans from high interest non-banking sources to competitive rates offered by scheduled commercial banks. The loans from scheduled commercial banks at competitive rates is likely to increase buyers’ inclination for home purchase.
Also, small scale projects with relatively shorter completion periods, developer-buyer connect and higher visibility on timely completion led to increased sales of homes. Lastly, developers have been offering homes in the sweet spot that fit the budget of most homebuyers.
"In addition to these, various policy initiatives like the Smart City Mission, development of industrial corridors, the Atal Mission for Rejuvenation and Urban Transformation (AMRUT), metro rail projects, Prime Minister Awas Yojana (Urban) and Make in India, have added value to the overall buying sentiments within these markets," said Samantak Das, chief economist and Head of Research & REIS, JLL India.