New Delhi, April 14 (NationPress) A significant transformation in the financial landscape of Indian households has resulted in physical assets, predominantly real estate, comprising nearly 70 percent of their savings. This marks a rise from the pre-pandemic average of 58 percent recorded between FY16 and FY20, according to a report released on Tuesday.

In tandem, the financial liabilities of households have surged to 6.2 percent of GDP in FY24, up from around 4.1 percent pre-pandemic, leading to a decline in net financial savings from 7.7 percent to 5.2 percent of GDP, as highlighted by the report from multi-family office Client Associates.

Investments in real estate have risen to 12.8 percent of GDP in FY24, making it the leading category for savings as lower mortgage rates and heightened aspirations fuel home buying.

India's household financial framework is undergoing notable structural shifts. Despite remaining one of the globe's premier saving nations with gross national savings consistently surpassing 29 percent of GDP, the composition of these savings and the usage of household credit have shifted dramatically since the pandemic, the report elaborates.

Personal and retail lending has seen a compound annual growth rate of 17.6 percent from FY16 to FY25, nearly double the growth rate of nominal GDP. Credit cards have exhibited the most robust growth at 25.2 percent CAGR, followed by other personal loans at 20.1 percent.

“Indian households have transitioned from passive saving behaviors to becoming proactive economic participants. They now borrow to acquire assets, engage with financial markets, and shape capital movements within the economy,” stated Nitin Aggarwal, Director of Investment Research at Client Associates.

Investment in stocks and mutual funds has escalated from approximately 4 percent of financial asset flows in FY20 to an estimated 15 percent by FY25.

Households contribute nearly 60 percent of India's total domestic savings, averaging close to 20 percent of GDP annually, positioning them as the most substantial and reliable source of domestic capital.

The report indicates that the rising levels of borrowing reflect increasing confidence and ambitions, especially among the youth. However, it also warns that elevated debt levels can strain cash flow and hinder financial flexibility if not managed prudently.

India's youthful demographic, advanced digital infrastructure, and growing access to formal credit are likely to accelerate this transformation, the report concludes.