Easy loans, high incomes boost youth spending

Twenty-somethings go in for homes, cars.

Sticker shock is a term India's young consumers are increasingly unfamiliar with. The easy credit sloshing all around and galloping incomes have enabled people to acquire big-ticket assets like homes and cars at a much younger age.

According to an ICICI Bank study, the average age of home loan seekers in the country has come down by five years in the last three years, and the number of people going in for car loans in the 21-35 age group has increased by 22 per cent in 2004-05 compared with last year.

The study is based on the bank's data on the spending pattern of its 3 million credit card and retail banking consumers.

The study says the average age of those buying a home has come down to 38 in 2004 from 42 in 2002. Explains V Vaidyanathan, senior general manager, ICICI Bank Property Services: "The average Indian is buying his dream house at a much younger age than his parents. Credit instruments like home loans are easily available and disposable incomes are rising fast."

With India's working population set to cross 744 million by 2009, an increase of 139 million over the current level, ICICI Bank estimates its housing loan and car loan customers will get younger in the coming years.

The average size of the home loan, too, has increased significantly in the first nine months of 2004-05. In a sure sign of the growing affluence of Indian consumers, ICICI Bank witnessed a 52 per cent jump, compared with 2003-04, in the number of people availing a home loan of more than Rs 25 lakh.

Again, while 35 per cent of its customers went in for a home loan of Rs 10 lakh in that year, in 2004-05 almost 50 per cent went in for a loan of that size.

"Real estate developers and builders have had a good year as people are buying bigger houses than ever before," says Vaidyanathan.

According to Arvind Singhal, chairman, KSA Technopak, the boom in housing offers tremendous opportunities for retailers in specialised segments like home furnishings and consumer durables.

The study says the expansion is likely to go on as the number of upper income households "" those having annual incomes between Rs 3 lakh and Rs 5 lakh "" will witness the fastest growth, touching 91 million in 2009 from 46 million in 2002.

In car loans, according to the ICICI bank data, consumers are upgrading to bigger cars at a much younger age, and there is an upward shift in the ownership pattern.

The number of entry-level customers has fallen from 42 per cent in 2002-03 to 37 per cent in 2004-05, and the number of people buying a mid-segment set of wheels has gone up to 58 per cent from 47 per cent in 2002-03.