The New Psychology Of Homebuying

In this conversation with Asma Rafat, Mehernosh Tata, MD & CEO, Godrej Housing Finance, a subsidiary of Godrej Capital, reflects on changing buyer psychology, cautious lending trends, and the growing role of technology in shaping India’s housing market.


Affordability has traditionally been measured through income-to-price ratios, but that lens feels increasingly outdated. How do you define affordability for today’s homebuyers in real, lived terms?

Today, affordability is increasingly being viewed in real, lived terms. Buyers are evaluating not just the price of the home, but the overall cost of living associated with it, such as daily expenses, access to public transport, and proximity to essential infrastructure. For instance, a slightly higher-priced home in a well-connected location can, in reality, be more affordable over time due to savings in commuting costs and time. Similarly, integrated amenities within residential communities can reduce the need for external spending on recreation or social infrastructure. As a result, affordability today is less about “Can I buy this house?” and more about “Can I live well in it; comfortably, safely and without compromise?”

With interest rates fluctuating over the past few cycles, how are you seeing buying psychology shift?

Are decisions being delayed, downsized, or simply recalibrated? Post-COVID, there was a phase of euphoria where buyers were upgrading homes driven by the need for more 31 Financial literacy has also seen a space, especially with work-from-home becoming mainstream. That led to a strong shift from 1 BHK to 2 BHK and larger homes. Over the last 1 year, that euphoria has settled into a more balanced, thoughtful approach. Buyers are becoming more informed and risk aware. Recalibration is the dominant trend. Buyers are reassessing budgets, re-evaluating locations, and, in some cases, opting for slightly smaller homes or more peripheral micro-markets to stay within comfortable EMI levels. On the other hand, rate-sensitive buyers and investors are more likely to adopt a wait-and-watch approach. In fact, investor activity today is more concentrated and selective, visible strongly in certain macro-markets like Gurgaon, rather than being broad based. Overall, the market is transi tioning from an investment-led cycle to a more end-user-driven one, which, in our view, is a far more sustainable foundation for long-term growth.

How do lenders respond to the gap between buyer eligibility and borrowing comfort?

There are gaps between eligibility and comfort, and it varies significantly across customer segments. In the prime segment, customers are often eligible for higher loan amounts but consciously choose to borrow less. This is largely driven by financial prudence. Many anticipate potential income variability, especially salaried borrowers or simply prefer not to stretch themselves into long-tenure repayment commitments. In contrast, in the affordable segment, we often see the reverse dynamic, customers aspire for a higher loan amount than what they are eligible for. This is because homeownership here is a deeply aspirational, often once-in-a-lifetime category purchase. There is a strong emotional component, and borrowers tend to be more optimistic about their future income growth and repayment capacity. As lenders, our role is to bridge this gap responsibly. In the affordable segment, we do look at structured solutions, such as adding co-applicants like earning family members to enhance eligibility. However, this is always balanced with a strong focus on prudent underwriting and long-term repayment sustainability.

What is the biggest hurdle for first time buyers today: pricing, credit access, or financial literacy?

For most Indians, buying a home is a once-in-a-lifetime decision, which is why pricing remains the single biggest friction point for first-time buyers. Over the last few years, we have seen prices in the affordable housing segment increased by nearly 25% since 2022. At the same time, the availability of homes at lower price points has declined, as developers increasingly focus on mid income and luxury segments where margins are higher. This combination of rising prices and shrinking supply has significantly increased the entry barrier for first-time buyers. On the other hand, access to credit has improved considerably. The ecosystem today is well-segmented, with banks catering effectively to prime and high-credit-quality customers, while housing finance companies have deepened their reach in the affordable segment. Financial literacy has also seen a meaningful uplift, supported by literacy campaigns run by the RBI and financial inclusion schemes like PMAY, Jan-Dhan Yojana by the government.

How far has technology improved underwriting, risk assessment, and loan turnaround times?

Technology has played a significant role in improving turnaround times and delivering a more seamless and dignified customer experience. Today, the entire loan journey from application and documentation to tranche demand payment has become largely digital, which has materially reduced processing timelines and improved transparency for customers.  At Godrej Capital, we have shared our industry first ‘developer portal’ with elite developers so that the developers can bulk upload tranche-based demand requests and offer convenience to the home buyer to consent on a link and confirm payment. This end-to end solution is delivered quickly and seamlessly facilitating both the home buyer and the developer. On the underwriting and risk assessment side, technology has enabled faster and more efficient decision-making. Tools such as the Account Aggregator framework, CKYC, and platforms that summarize bank statements have streamlined access to verified financial data, allowing lenders to assess borrower profiles with greater speed and accuracy. That said, the use of advanced analytics and AI in underwriting particularly for leveraging alternative data or predicting repayment behaviour is still at a relatively early stage and is being adopted selectively across the industry. Looking ahead, technology will continue to act as a key enabler, augmenting underwriters and strengthening risk assessment, while maintaining a balanced approach between digital efficiency and prudent credit evaluation.