Low-cost home loans face higher risk of defaults: report

Mumbai: Even as government policies give huge thrust to affordable housing, data reveals elevated risks in the segment for lenders because of a higher propensity among the borrowers to default.

As against 1.96 per cent of overall home loans not repaid for over 90 days, the same for loans under Rs 25 lakh, classified as affordable housing, was 2.33 per cent as of November 2017, a report by domestic rating agency Crif Highmark said on Wednesday.

In case of home loans under Rs 10 lakh, where the average ticket size is Rs 8 lakh, the 90-day overdue loan repayments stand at 4 per cent, twice that of the industry average, it added. At Rs 7.79 lakh crore, affordable housing accounts for 50 per cent of the overall home loans of Rs 15.8 lakh crore.

As more banks take refuge in the sector considered more resilient in times of piling non-performing assets, the banking system's home loans outstanding has increased 13.6 per cent since April alone.

As the government seeks to meet its target of housing for all by 2022, a slew of sops have been given to the affordable housing sector, including inclusion in the mandatory priority sector lending by giving the sector an infrastructure status, introduction of tax benefits under section 80-IA of the Income-Tax Act, concessions on long-term capital gains tax provisions, etc.

Foreign banks are the most affected in the sub-Rs-10- lakh category with bad loans of 16.20 per cent. Even though MNC lenders account for a small portion of the overall outstanding, they have the highest stress among all on the housing finance side at 8.42 per cent, it said.

The 90-day overdue for the overall housing finance segment stood at 1.36 per cent for March 2016, and has been rising since then, at 1.89 per cent in June 2017, and at 1.96 per cent in September 2017.

New Delhi, Uttar Pradesh and Tamil Nadu are the pockets with highest stress in the housing finance sector, while the affordable housing stress is higher in the Kolkata, Chennai and Ghaziabad markets, it said.

The largest housing loan market is Maharashtra, accounting for 23 per cent of the overall Rs 15.78 trillion outstanding, the agency said. Even as public sector banks and dedicated housing finance companies dominate with a 40 per cent share each, the latter is experiencing a faster growth, it said.

Housing finance companies are more stronger in the large ticket premium segment, while the state-run banks have a dominance in the affordable housing sector with a 59 per cent share of the loans.

During the past three years, state-run lenders' share in new home loan disbursals has decreased by 10 per cent, while that of housing finance firms has risen by 12 per cent. From an average ticket size perspective, New Delhi leads among the states with average loan size of Rs 40 lakh, the data showed.