Surge in Housing Loans Drives India's Household Debt to 38% of GDP

A report by Care Edge Ratings reveals that India's household debt, primarily driven by housing loans, has surged to 38% of GDP. While this debt level is significant compared to emerging economies, the increase has not impacted overall household savings, which remain stable at 24% of GDP.

A surge in housing loans has driven India's household debt to 38% of GDP, according to a recent report by Care Edge Ratings. Housing loans now constitute over 50% of retail loans, reflecting a growing trend in household leverage. The report also notes a rise in unsecured loans, including credit card debts.

Although the current debt level is lower than the peak of 39.2% in FY21, it remains significant, especially when compared to emerging economies such as Brazil (35%) and South Africa (34%). The report indicates that housing loans are the primary driver of this debt surge, even as the overall gross household savings remain stable at 24% of GDP. The shift in savings patterns from bank deposits to physical assets, particularly real estate, shows a growing preference for homeownership and investment-driven demand for housing.

The report underscores that household debt linked to real estate investments boosts public infrastructure and has a more productive economic impact compared to debt used for personal consumption. While current debt levels are manageable, the rising trend in unsecured lending and household leverage necessitates close monitoring. Sustained household income growth is crucial for maintaining household savings and controlling leverage.

(With inputs from agencies.)