Home loans growing at a faster rate in Tier 3 and 4 districts, thanks to WFH: SBI report

  • Indian companies will likely have to contend with the fact that WFH is here to stay.
  • A new report by SBI has revealed that thanks to WFH’s popularity, Indians are increasingly obtaining home loans in Tier 3 and Tier 4 districts.
  • As a result, housing demand and prices have also increased at a faster pace when compared to Tier 1 and Tier 2 districts.
  • Women home loan borrowers also account for half of fresh disbursals in the top 20 districts in T3 and T4 districts.

The boom in Work from Home in the post-pandemic era is now reflecting in home loan growth, according to a report by the State Bank of India.

While companies in India and around the world are increasingly demanding their employees to return to offices, it looks like at least some of them have decided to set up offices in their homes.

“Working from Home is redefining the priorities as households are shifting into digital offices within their own homes in Tier 3 and Tier 4 districts,” the report by SBI said.

The report further adds that this has not only led to the growth in loans being faster in T3 and T4 districts, even the average loan sizes have increased much more when compared to Tier 1 and 2 districts between FY19 and FY22.

Overall, home loans have grown at a compounded annual growth rate (CAGR) of 11% since FY19, but T3 and T4 districts have grown at a faster pace of 12-13%.

“As the pandemic forced buyers to reassess the work-life balance, cities having better infrastructure connections have found renewed interests from new-gen buyers whose digital lifestyle enables them to connect to work from anywhere,” the report adds.

Housing demand and prices are increasing at a much faster rate, too

T3 and T4 districts are shining in other areas, too – according to the report, both housing demand and prices are growing at a much faster rate.

“Many tier-2 cities including Visakhapatnam, Guwahati, Raipur, Surat, Vadodara, Jaipur, Lucknow, Dehradun and tier-3 city Coimbatore have witnessed higher growth in housing prices,” the report said.

It attributes this growth to an increasing trend of WFH and freelance jobs.

Women account for almost half of the loans in the top 20 districts. In fact, two districts – Dang in Gujarat, and Arwal in Bihar stand out where 86% and 75% of fresh loans were sanctioned to women, respectively.

A couple of reasons for this could be the additional subsidies of up to 0.1% on interest and the simpler eligibility criteria, making home loans an attractive proposition for women.

Fresh disbursals to T3 and T4 districts also register growth

The share of T3 and T4 districts in fresh disbursals has also registered growth between FY19 and FY22, the report says – together, T3 and T4 districts account for 36% of fresh disbursals in FY22, up from 32% in FY19.

More specifically, Uttar Pradesh, Karnataka and Punjab top the list when it comes to growth in fresh disbursals – 6 districts of UP, and 5 districts of Karnataka and Punjab each figure among the top 20 in T3 and T4 categories.

One of the reasons for the growth in UP, specifically, is the launch of the SVAMITVA scheme by the Indian government in which rural people are given the right to document their residential properties so that they can use their property for economic purposes.

Essentially, this scheme enables rural people to document their properties and then use them for obtaining loans and other financial benefits. So far, 20.8% of villages in UP have been covered, and that seems to have had an impact on fresh loan disbursals already.


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