Affordable housing loans show good growth; NPAs rise too, says RBI

Non-performing assets (NPAs) in affordable housing loans increased during 2016-17, as loans below Rs 200,000 witnessed a significant growth in disbursements and a “moderate” increase in NPA levels, a report by the Reserve Bank of India (RBI) said.

Housing finance companies (HFCs) and public sector banks (PSBs) experienced a slowdown in housing loan disbursements during 2016-17, while the overall NPA levels for the loan segment increased year-on-year.

The report — Affordable Housing in India, in the RBI’s January 2018 Bulletin — said low-income groups and economically weaker sections accounted for 96 per cent of the housing shortage.

Traditionally, property developers, especially in the private sector, catered to the middle-income and high-income customers due to the higher returns on such sales. Low-cost housing projects were ignored, given the low-profit margins. 

By 2030, there would be a demand for 38 million affordable housing units, up from 19 million in 2012, as 40 per cent of the population would start living in urban areas, said the RBI report quoting a McKinsey & Co study.

According to data from the National Housing Board, the apex financial regulator for the housing market, disbursements of loans up to Rs 1 million increased from Rs 309.2 billion in 2014-15 to Rs 429.9 billion in 2016-17; representing a 39 per cent growth. Disbursement of loans in the above-Rs 2.5-million slab increased from Rs 1,167.65 billion in 2014-15 to Rs 1,688.66 billion in 2016-17, which is a 44 per cent growth. 

NPA ratios from PSBs, in the Rs 0.2-million slab, decreased minutely, while the NPA levels in the sub-Rs 0.5-million category of housing loans increased from 4.9 per cent in 2015-16 to 5 per cent in 2016-17. NPA ratios for other categories of housing loans distributed by PSBs declined between FY2016 and FY2017. 

HFCs, on the other hand, witnessed a rise in NPA levels for the sub-Rs 0.2-million category; increasing from 6.1 per cent in FY2016 to 8.6 per cent in FY18. For the sub-Rs 0.5-million loan slab, the NPA ratios increased by 100 basis points from 2.4 per cent in FY2016.

Overall, housing loans up to Rs 200,000 had the highest NPA levels, and PSBs reported higher NPA levels than HFCs in the past two fiscal years, the RBI’s report stated. 

New launches in the top-eight cities declined by 8 per cent during 2016-17, while the number of new affordable housing project launches increased by 10 per cent during the corresponding period, according to a research report by Cushman & Wakefield. 

The share of the affordable housing segment — in terms of the number of housing projects launched — increased from 25 per cent in 2015-16 to 30 per cent in 2016-17.