Stating that incomes will grow faster than house prices, Parekh said that demand for housing continues to be very strong. This was unlike the West where investment was fuelling demand and inflation in building materials was pushing up prices. “The mortgage-to-GDP ratio in India at 11% is still very low. If one looks at the cohort of those working in sectors like IT, e-commerce, professional services, financial sector, or those working in large companies, or the breed of new age entrepreneurs — income levels certainly have risen,” said Parekh.
He was speaking at a CII real estate conference.
“We are at the bottom of the interest rate cycle, but there is sufficient confidence in the central bank that any increase in interest rates, if at all, from hereon will be calibrated and non-disruptive. A customer who wants a home will not hold back because interest rates inch up slightly,” said Parekh.
He said that HDFC has commissioned a study on the potential for real estate development for rental housing. He added that a couple of global funds are working with HDFC for investment in rental housing. However, rental yields in India were “out of whack” with housing, generating 1-3% yields.
Speaking at the same event, billionaire investor Rakesh Jhunjhunwala said that real estate business, given the low returns, was not suited for listing. “Equity is the costliest form of financing. I do not understand the purpose of listing of real estate companies,” he said. He added that the he also did not see housing yields improving in India as no one could afford a rental which returned 6% on the property value. He was, however, bullish on warehousing and InvITs.
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