A clear K-shape is visible in the housing loans getting disbursed

livemint.com:

₹35 lakh in metropolitan centres (with a population of 10 lakh and above) and up to ₹25 lakh in other centres… provided the overall cost of the dwelling unit in the metropolitan centre and at other centres does not exceed ₹45 lakh and ₹30 lakh, respectively." The remaining loans are non-priority loans. In the months leading up to May 2022, priority sector housing loans formed around 35-36% of the overall outstanding housing loans of banks. By June 2023, they had fallen to 31.5%, implying that banks are giving out more non-priority housing loans.

Of course, these loans are largely taken on by the well-to-do, who do not get impacted much by the rise in EMIs. In fact, the outstanding priority sector housing loans of banks from January to June have been just 1-2% higher than during the same months in 2022. When it comes to non-priority housing loans of banks, they have been around 22% higher from January to June in comparison to the same months in 2022.

Further, the percentages don’t explain this inequality well enough. The outstanding priority sector housing loans from June 2022 to June 2023 went up by ₹137.76 billion. In comparison, the non-priority sector housing loans went up by ₹2.47 trillion, nearly 17 times more.

To be fair, this anomaly existed even before the Reserve Bank started raising rates, but it has only got worse, primarily because real estate in the formal sector continues to remain very expensive and the fact that prices of high-end real estate have rallied in the last 12-18 months. Of course, actions of central banks have consequences. Things don’t always work in just one direction.