Mortgage Market in India


Mortgage Financing industry, which is primarily known as the housing finance industry in India was estimatedapproximately at US $ 18 billion.



A significant change in the structure of themortgage industry is being marked in the recent years. Presently the banks aregaining market share in direct housing finance segment. From estimation it isfound that the share of commercial banks in thedirect housing finance segment has increased from 27% in FY 2000 to 57% in theFY 2003.

Thoughthe housing finance industry in India is growing for the past few yearsstill financing through the organized sector continues to account only for 25%of the total housing investment in India (Source: LIC Housing finance).

The top players in thisindustry are housing finance companies, commercial (local as well as foreign)banks, cooperative banks and other non-banking financial companies (NBFCs).

Presently the commercial banks are set to take the major portion in nextyears.  Presently Housing Development Finance Corporation (HDFC) is themarket leader followed by State Bank of India (SBI). The Industrial Credit andInvestment Corporation of India (ICICI) Bank and the Life Insurance Corporation(LIC) Housing Finance Limited also have significant market share.

The industrysources has reported that, 8 to 10 percent of the market share thatforeign-owned banks have in the industry, Citibank has 5 percent share,followed by Standard Chartered and HSBC with about the 3 to 5 percent.

Housing Finance Disbursement In India

Here the table gives us a clear picture on the trend inorganized housing finance disbursements in India.


US $ Billion  FY 03 FY 02
Housing Finance Companies 3.91  3.24
Banks Direct 5.24 1.91
Banks Indirect 1.51 1.26
Total Direct 9.15 5.15
Growth Rate % 77.6 27.5

 Sources: All figures in the above tableare calculated and Industry estimates.

Housing finance disbursements have increased at a compoundannual growth rate of 45.6% in the recent years with FY 2003 reporting aphenomenal 78% growth. While the growth in fresh purchase of housing assets maybe lower than the disbursement growth because of the increasing incidence ofloan takeovers (by competitors), it still remains high.

In case of India there is a stiff competition in thefinancial services mainly from the European Banks like ABN Amro, HSBC andStandard Chartered bank.

Top U.S. financial services companies are active inthe asset securitization market in India are Citibank, GE Countrywide, MorganStanley etc. but not all of them are engaged in the market right now.

Home Loan Disbursement In India

The home loan disbursement by the banks and housingfinance companies has increased from Rs.29359.29 Crores in 2001-02 to Rs.51672.7 Crores in 2002-03.

Home Loan Disbursement (Rs.In Crores)

Years HFC's Banks
1999-00 9812.03 9911.35
2000-01 12637.85 9787.24
2001-02 14614.44 14744.85
2002-03 17832.17* 33840.53

Sources: -National Housing Bank

The share of banks in total home loan disbursement hasincreased from 43.6% in the year 2000-01 to 65.5% in 2002-03.

Mortgage To GDP Ratio In India

The Mortgage to GDP Ratio (ratio of outstanding home loansto GDP) in India is very insignificant in comparison to the other countries. Inthe developed countries the ratio varies from 25% to 60%. For the year 2001,themortgage to GDP ratio in India was at 2.5%.

IFC and India’s Housing Finance Market

TheInternational Finance Corporation, the private sector arm of the World BankGroup, has provided financing package of $200 million to HDFC (HousingDevelopment Finance Corporation).

The loans of IFC’s strategy are to assistthe expansion of financial markets in India and, in particular, to promoteaccess to housing finance by middle-and lower middle- income households. In theyear to June 30, 2003, IFC committed to invest up to $388 million in projectsin India.

The mission of IFC is to promotesustainable private sector investment in developingcountries, helping to reduce poverty and improve people's lives. 

IFCfinances private sector investments in the developing world, mobilizes ital inthe international financial markets, helps clients improve social andenvironmental sustainability, and provides technical assistance and advice togovernments and businesses.