India is not immune to global disruptions, so some slowdown in growth is inevitable, he said, adding, since India is a domestic, consumption-based economy, India is less dependent on the global economy compared to countries that rely heavily on exports.
“As a country, we are fortunate to see more tailwinds than headwinds. What is working well for India is the fact that we have political stability and I don’t see this being disrupted in 2024 either,” Parekh, chairman of HDFC Ltd said at the Dainik Bhaskar conclave.
Reeling out some of the advantages, he said, the Indian banking and financial system, which had had its troubles earlier, is now in a much stronger position and is well-capitalised, the non-performing loans are now much lower and the system is strongly regulated.
Besides, he said, the government is pulling all its weight to position the country as a global manufacturing hub, and the country has aligned itself to the goals of decarbonising the Indian economy in an orderly manner.
On housing finance, Parekh said, the runway for it in the country is immense as mortgage-to-GDP ratio in India at 11 per cent which is very low compared to peers like China, Malaysia, Singapore and significantly lower than much of the western world where mortgage-to-GDP ratio is upwards of 60 to 90 per cent.
Observing that urbanisation in India is an irreversible trend, he said, at present 32 per cent of the population reside in cities and this is expected to be 40 per cent by 2030, generating demand for the housing sector as well as the housing finance sector.India still has a huge housing shortage estimated at over 29 million units and a recent estimate forecast that the Indian real estate market is likely to touch $1 trillion by 2030, he said.
Speaking about the affordable housing segment, Parekh said withdrawal of the Credit-Linked Subsidy Scheme (CLSS) and concessional stamp duties in certain states coinciding with the uncertainty on the interest rate trajectory had some dampening impact on housing, especially for the low income segments.
Pointing out that home loans are generally for a long tenor and over this period, he said, there will be both, upward and downward interest rate cycles.
India is lucky that its mortgages are not underwater like parts of the western world where the mortgage loan in itself is higher than the value of the property, he said, adding, a large percentage of the young population is also in favour of the mortgage market.
Besides, he said, adding rising opportunities in Tier II and Tier III cities are pushing demand for housing and housing finance.
“In the services sector, we have already seen this play out well. For instance, the GIFT City in Ahmedabad Is gaining traction due to the number of government initiatives to attract investments as an international financial centre,” he said.
Other cities like Jaipur, Indore, Coimbatore, Chandigarh, Thiruvananthapuram, Bhubaneshwar, Vadodara, Visakhapatnam amongst others have seen a healthy mix of IT and IT-enabled service companies that consciously choose to operate out of tier II and tier III cities, he said.
In equal measure, with the government’s focus on making India a global manufacturing hub and with the development of industrial corridors, the opportunities for real estate development have increased manifold, he said.
There is a growing demand for new real estate assets such as warehousing, fulfilment centres, data centres, hospitality, lab offices, amongst others expanding into the tier II and tier III cities and beyond, he said.
Urging developers from tier II and tier III cities to focus a lot more on affordable and mid-income housing stock, Parkesh said realtors should not be ambitious in trying to launch too many projects at one time.
“Value the relationships you have – especially the lending relationships. Find lenders who will support you for the long haul, not the opportunistic ones. And remember it is not always about scrounging and going to the lender that offers you the cheapest loan,” he said.
They say a house is made with walls and beams, but a home is built with love and dreams, he said, adding, “as developers, there can be nothing more fulfilling than helping build a property owning democracy. India grows when India builds.”
He also advised builders to focus on sustainability and Environmental, Social and Governance (ESG) framework is not elitist and only for the large, listed developers but for all.
The path forward is going to be increased due diligence on environmental and social parameters and green buildings are going to increasingly become mainstream, he added.