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

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. According to domestic rating agency Crif Highmark, 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.

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 which is 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, reports PTI.

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.