Af­ford­able hous­ing seg­ment to re­main key growth driver

Hindustan Times (Chandigarh) - Estates - - ESTATES - HT Es­tates Cor­re­spon­dent ht­es­tates@hin­dus­tan­

With most home­buy­ers and in­vestors de­fer­ring their de­ci­sion to pur­chase a house hop­ing prices will fall fur­ther fol­low­ing the ban on ` 500 and ` 1000 notes, the growth in home loans is ex­pected to be low. It’s ex­pected to range be­tween 16% to 18% this fi­nan­cial year as com­pared to the ear­lier ex­pec­tated level of 18% to 20%, as per ICRA es­ti­mates.

“While growth in the prime home loan seg­ment could wit­ness mod­er­a­tion, the af­ford­able hous­ing seg­ment is likely to grow at a faster pace than in­dus­try with ef­forts be­ing made to ad­dress the sup­ply, de­mand and af­ford­abil­ity is­sues,” says Ro­hit Inam­dar, group head fi­nan­cial sec­tor rat­ings, ICRA.

Post de­mon­eti­sa­tion, the delin­quen­cies in the af­ford­able hous­ing and self-em­ployed seg­ments would in­crease given the bor­row­ers’ reliance on cash trans­ac­tions. What this means is that after de­mon­eti­sa­tion, cash in­comes have been im­pacted and some self-em­ployed home­buy­ers may have found it dif­fi­cult to pay at least two to three in­stall­ments. They may have missed pay­ments giv­ing rise to in­creased delin­quen­cies but the sit­u­a­tion has now been nor­malised.

Fur­ther, given the ex­pected correction in prop­erty prices liq­uid­ity of prop­er­ties may get ham­pered, im­pact­ing the loss given de­fault (loss in shares of an as­set if a bor­rower de­faults) .

De­spite ris­ing port­fo­lio vul­ner­a­bil­ity ow­ing to in­creas­ing share of non hous­ing loans, higher share of self-em­ployed and low-in­come bor­row­ers within hous­ing loan seg­ment and high com­pet­i­tive in­ten­sity lead­ing to di­lu­tion in lend­ing norms, gross NPAs are ex­peted for hous­ing fi­nance com­pa­nies (HFCs) to re­main range-bound be­tween 0.9% to 1.3% over the medium term, says Inam­dar.

Hav­ing said that, the in­fra­struc­ture sta­tus ac­corded to af­ford­able hous­ing projects will stim­u­late wider in­vestor com­mu­nity and im­prove the ac­cess to fund­ing av­enues like in­sur­ance and pen­sion funds thereby boost­ing the sup­ply of af­ford­able homes.

Fur­ther, ex­ten­sion of the credit-linked sub­sidy scheme to loans of value upto ` 12 lakh will ex­pand the el­i­gi­ble bor­rower base and also im­prove af­ford­abil­ity of the bor­row­ers ow­ing to lower equated monthly in­stall­ments (EMIs) and lead to bet­ter debt bur­den ra­tios.

In­cre­men­tal fund­ing costs for HFCs have come down con­sid­er­ably in the sec­ond half of the fi­nan­cial year 2017 with many HFCs rais­ing funds at me­dian rates of 7.5% to 8%. There­fore, cost of funds is likely to mod­er­ate fur­ther for HFCs.

The re­ported cap­i­tal ad­e­quacy for HFCs re­mained com­fort­able, due to the ben­e­fit from rel­a­tively lower risk weights for home loans and com­mer­cial real es­tate loans for res­i­den­tial projects.


In­fra­struc­ture sta­tus ac­corded to af­ford­able hous­ing projects will stim­u­late wider in­vestor com­mu­nity.

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