Buying homes: Why tax policies need a tweak

livemint.com:

₹35 lakh in metropolitan centres (with a population of 1 million 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 home loans are non-priority home loans. Second, home loans in India are given by commercial banks and housing finance companies. As per the National Housing Bank’s Report on Trend and Progress of Housing in India 2022, as of March 2022, of the total outstanding home loans of ₹25.11 trillion, 68% were distributed by banks and the remaining 32% by housing finance companies.

As of 1 July 2023, HDFC, the largest home finance company, merged with HDFC Bank. With this merger, the share of banks in the total home loans distributed crossed more than 80%. Given this, the home loans given by banks are now an even better representation of the home loan market in India, than was the case in the past.

The chart considers loans given by HDFC as a part of the banking system starting from July 2023. In November 2023, the ratio of priority home loans to overall home loans stood at 28.5%, and that of non-priority loans stood at 71.5%. (If we leave out HDFC loans, the ratio of priority home loans and non-priority home loans to overall home loans was at a very similar 29.5% and 70.5%, respectively.) What the chart clearly tells us is that the ratio of priority home loans has been falling over the years and that of non-priority home loans has been rising.