India's household debt soars to 38% of country's GDP led by housing loans, unsecured lending: Report

Housing loans in India: The household debt in India has grown considerably driven by an expansive growth of housing loans and a rising trend of unsecured lending, according to a recent report by Care Edge Ratings. As of FY23, household debt accounted for a handsome 38 per cet of India's GDP . Household financial leverage, as reflected in the country, continues to rise.

Mortgage loans have become more than half of the overall retail loans. It has become the leading driver of household debt growth. While the household debt ratio currently remains modestly behind the peak of 39.2 per cet in FY21, it is sufficiently high compared to Brazil at 35 per cet and South Africa at 34 per cet.

Unsecured lending, in turn, which includes credit card debt, also surged but still remained relatively tame in comparison to household debts driven by housing loans. "While unsecured loans have lately gained considerable momentum and need to be kept under close scrutiny, housing loans are still the real pushers of household debt," the report said.

But in spite of all these developments, gross household savings in India have remained stable and, it goes without saying, were kept at around 24 per cet of GDP . The patterns of savings, however, have changed with more and more households taking their savings out of the bank and putting them into physical assets, mainly in real estate. This reflects rising aspirations for homeownership as well as investment-driven demand for housing, as per the report.

It further added that debt related to real estate and households is more productive than debt used for personal consumption. Investing in real estate not only aids the household sector but also helps in the positive contribution of building public infrastructure, thus giving a broader boost to the economy.

According to the report, house debt to GDP is still within manageable limits; yet the trend in growth of unsecured lending together with overall household leverage demands an eye on it from time to time.

(With ANI inputs.)